Question

Vacation Pay and Pension Benefits Regling Company provides its employees vacation benefits and a defined benefit pension plan. Employees earned vacation pay of $40,000 for the period. The pension formula calculated a pension cost of $222,750. Only $185,000 was contributed to the pension plan administrator. (a) Provide the journal entry for the vacation pay. If an amount box does not require an entry, leave it blank. (b) Provide the journal entry for the pension benefit. If an amount box does not require an entry, leave it blank.

Answer 1

Answer and Explanation:

According to the scenario, journal entry for the given data are as follows:

(a).

Vacation Pay Expenses A/c Dr. $40,000  

To Vacation Pay Payable A/c. $40,000

(Being vacation pay for the period is recorded)

(b).

Pension Expenses A/c Dr. $222,750  

To Cash A/c. $185,000

To Unfunded Pension Liabilities A/c $37,750     ( $225,750 - $185,000)

( Being pension benefit for the period is recorded)