Jones Company has a postretirement benefit (health care) plan for its employees. On January 1, 2008, the
Question:
Jones Company has a postretirement benefit (health care) plan for its employees. On January 1, 2008, the balance in the Accumulated postretirement benefit obligation account was \($300\) million. The assumed discount rate-for purposes of determining postretirement obliga- tions and expenses is 8%. Jones does not prefund postretirement benefits, so there are no plan assets. It created a \($45\) million prior service cost credit at the end of 2007 when the company modified the health care plan to reduce the maximum benefits paid to each employee. This amount is being amortized over 15 years. The service cost component of post- retirement benefits for 2008 is \($35\) million.
Required:
1. Determine the amount of postretirement benefits cost for 2008.
2. If benefits paid to retirees totaled \($64\) million in 2008, determine the balance in the Accumulated postretirement benefit obligation account on December 31, 2008.
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