Big City provides a defined benefit pension plan for employees of the city water
ID: 2328212 • Letter: B
Question
Big City provides a defined benefit pension plan for employees of the city water department, an enterprise fund. Assume that the service cost component is $420,000, and interest on the pension liability is $380,000 for the year. Actual returns on plan assets for the year were $300,000, while the projected level of earnings on plan investments was $360,000. This difference is to be amortized over a five-year period, beginning this year Finally, assume the City is amortizing a deferred inflow resulting from a change in plan assumptions from a prior year in the amount of $10,000 per year. Prepare journal entries to record annual pension expense for the enterprise fund.Explanation / Answer
Date
Account titles and explanations
Debit ($)
Credit ($)
Service costs
420000
Interest
380000
Bank
800000
(Being the pension expenses paid)
Plan assets (Pension)
800000
Service costs
420000
Interest
380000
(Being the expenses adjusted against the plan assets)
Date
Account titles and explanations
Debit ($)
Credit ($)
Service costs
420000
Interest
380000
Bank
800000
(Being the pension expenses paid)
Plan assets (Pension)
800000
Service costs
420000
Interest
380000
(Being the expenses adjusted against the plan assets)
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