Record Entries for a Pension Trust Fund Pirate Cove maintains a Pension Trust Fu
ID: 2578513 • Letter: R
Question
Record Entries for a Pension Trust Fund
Pirate Cove maintains a Pension Trust Fund for its city employees. At the start of the year, the Fund holds cash of $150,000 and investments that have a fair value of $4,000,000. The Fund has the following transactions during its fiscal year. Prepare entries to record these transactions in the Pension Trust Fund accounts.
a. Bills the General Fund $200,000 for the required annual contribution. The pension plan does not require contributions from its employees.
b. Receives payment of $200,000 from the General Fund.
c. Receives interest and dividend income of $150,000 in cash on its investment portfolio.
d. Receives $215,000 from selling investments carried on the books at $200,000.
e. Makes new investments totaling $275,000.
f. Pays annuity benefits of $325,000 to retirees or their spouses.
g. Pays administrative expenses of $100,000 in cash.
h. The investments held by the Fund have a fair value of $4,100,000 at year-end.
GENERAL JOURNAL Page
Date
Description of entry
Post Ref
Debit
Credit
GENERAL JOURNAL Page
Date
Description of entry
Post Ref
Debit
Credit
Date
Description of entry
Post Ref
Debit
Credit
Explanation / Answer
Journal entries for pension trust fund
Date
Description of entry
Post ref.
Debit
Credit
a)
Due from general fund
$200,000
Additions -pension contribution-employer
$200,000
b)
Cash
$200,000
due from general fund
$200,000
c)
Cash
$150,000
Additions-investment interest and dividends
$150,000
d)
Cash
$215,000
Investments
$200,000
Additions-net appreciation on fair value of investment
$15,000
e)
Investments
$275,000
Cash
$275,000
f)
Deductions-retirement annuities
$325,000
Cash
$325,000
g)
Deductions-administrative expenses
$100,000
Cash
$100,000
h)
Investments
$25,000
Additions-net appreciation in fair value of investment
$25,000
Working note:
The net appreciation in fair value of investments in entry h. is the difference between the carrying value of investments before revaluation ($4,075,000) and the new fair value ($4,100,000). The carrying value before revaluation is the opening carrying value ($4,000,000) and the changes resulting from transactions d. and e
Date
Description of entry
Post ref.
Debit
Credit
a)
Due from general fund
$200,000
Additions -pension contribution-employer
$200,000
b)
Cash
$200,000
due from general fund
$200,000
c)
Cash
$150,000
Additions-investment interest and dividends
$150,000
d)
Cash
$215,000
Investments
$200,000
Additions-net appreciation on fair value of investment
$15,000
e)
Investments
$275,000
Cash
$275,000
f)
Deductions-retirement annuities
$325,000
Cash
$325,000
g)
Deductions-administrative expenses
$100,000
Cash
$100,000
h)
Investments
$25,000
Additions-net appreciation in fair value of investment
$25,000
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