6.1 Oregon Co.'s employees are eligible for retirement with benefits at the end of the year in which both age 60 is attained and they have completed 35 years of service. The benefits provide 15 years reimbursement for health care services of $20,000 annually, beginning one year from the date of retirement. Ralph Young was hired at the beginning of 1977 by Oregon after turning age 22 and is expected to retire at the end of 2020 (age 60). The discount rate is 4%. The plan is unfunded. The PV of an ordinary annuity of $1 where n = 15 and i = 4% is 11.11839. The PV of $1 where n = 2 and i = 4% is 0.92456. With respect to Ralph, what is the service cost to be included in Oregon's 2018 postretirement benefit expense, rounded to the nearest dollar?

Multiple Choice

$3,544.

$20,000.

$5,272.

$6,365.

6.2 Two independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences:

SITUATION	1		2
Taxable income	$	40,000	$	80,000
Amounts at year-end:
Future deductible amounts		5,000		10,000
Future taxable amounts		0		5,000
Balances at beginning of year, dr (cr):
Deferred tax asset	$	1,000	$	4,000
Deferred tax liability		0		1,000

The enacted tax rate is 40% for both situations. Required: For each situation determine the:

		situation
		1	2
a	Income tax payable currently
b	Deferred tax asset - balance at year end
c	deferred tax asset change dr or cr for the year
d	deferred tax liability - balance at year end
e	Deferred tax liability change dr or cr for the year
f	income tax expense for the year