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 5 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.

Question

Business

Guest

14 October, 00:50

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 5 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.

+2

Answers (1)

Know the Answer?

Cannon Harding · Answer 1

Solution:

Journal entries to record annual pension expense for the enterprise fund:

Service cost $420,000

Interest $380,000

Cash 800,000

Plan assets - pension 800,000

Service cost 420,000

Interest 380,000