Smith Corp. sponsors a 401 (k) plan for all its full-time employees. The company contributes 3% of each employee's salary to the plan. The total payroll for the year was $2 million. When recognizing the employer's annual contribution, Smith should

Employer's annual contribution = $60,000

Explanation:

Given:

Employer's annual contribution = 3% = 3/100 = 0.03

Total payroll = $2,000,000

Computation:

Employer's annual contribution = Total payroll * 0.03

Employer's annual contribution = $2,000,000 * 0.03

Employer's annual contribution = $60,000

Journal Entry

Date Account Title and Explanation Debit Credit

Employee pension expense A/c Dr. $60,000

Cash A/c Cr. $60,000

(Being Employee pension expense debited)