Question

The interest cost component of NPPBC is the_______________.

Answer 1

Answer: D

Explanation: Interest cost reflects the change in the APBO throughout the period which arise simply from a passage in time.

It is usually equal to the APBO at the start of the period times, the supposed discount rate which is used to regulate present value of future cash outflows currently expected or needed to satisfy the commitment or duty.

Answer 2

Answer:

b. increase in the APBO because of the passage of time.

Explanation:

NPPBC is an acronym for Net Periodic Post-retirement Benefit Cost.

The general rule is the prior service cost should be recognized in NPPBC: by assigning an equal amount of the retroactive benefits to each remain year of service from the plan amendment date to the full eligibility date of each active participant.

Hence, the interest cost component of NPPBC is the increase in the Accumulated Post-retirement Benefit Obligation (APBO) because of the passage of time