Question

The City of Monroe Police Department pension plan, a single-employer, defined-benefit plan, reported the following account balances as of January 1, 2015:
Debits

Credits

Cash

$140,000

Accrued Interest Receivable

72,000

Investments: Bonds

5,300,000

Investments: Common Stock

2,790,000

Accounts Payable

$27,000

Net Assets Held in Trust for Employee Benefits

8,275,000

Totals

$ 8,302,000

$8,302,000

Required:

a. Open a general journal for the City of Monroe Police Department Pension Trust Fund and record the following transactions for the year ending December 31, 2015:

(1) Member contributions were received in the amount of $400,000. The City General Fund contributed the same amount.

(2) Interest was received in the amount of $386,900, including the accrued interest receivable at the beginning of the year. The interest accrual at year end amounted to $86,000.

(3) During the year, common stock dividends amounted to $125,000.

(4) Investments were made during the year in common stock in the amount of $575,000.

(5) Annuity benefits in the amount of $377,400, disability benefits of $ 82,020 and refunds to nonvested terminated employees of $39,800 were recorded as liabilities.

(6) Accounts payable, in the amount of $507,500, were paid in cash.

(7) During the year, common stock valued at $505,000 was sold for $506,800. A portion of these funds, $502,000 were invested in common stock of a different company.

(8) At year-end, the market value of investments in bonds increased by $12,750; the market value of investments in stocks decreased by $5,770.

b. Post the entries to the Police Department Pension Trust ledger (t-accounts).

c. Prepare and post an entry closing all nominal accounts to Net Assets.

Answer 1

Answer:

(a)

JOURNAL ENTRIES

CITY OF MONROE POLICE DEPARTMENT PENSION TRUST FUND

FOR THE YEAR ENDING DEC 31,2015

PARTICULARS                                                  DEBIT($) CREDIT($)

1. CASH A/C DR                                                 8,00,000  

  TO MEMBERS CONTRIBUTION A/C                                   4,00,000

  TO CITY GENERAL FUND A/C                                           4,00,000

  (BEING CONTRIBUTION RECEIVED)  

2.CASH A/C DR                                                   3,86,900  

  TO INTEREST A/C                                                             3,14,900

  TO ACCRUED INTEREST A/C                                               72,000

  (BEING INTEREST RECEIVED)  

  ACCRUED INTEREST A/C DR                               86,000  

  TO INTEREST A/C                                                               86,000

  (BEING INTEREST ACCRUED)  

3.CASH A/C DR                                                     1,25,000  

  TO DIVIDEND A/C                                                             1,25,000

  (BEING DIVIDEND RECEIVED ON COMMON STOCK)  

4. INVESTMENT IN COMMON STOCK A/C DR    5,75,000  

   TO CASH A/C                                                                     5,75,000

  (BEING AMOUNT INVESTED IN COMMON STOCK)  

5.ANNUITY BENEFIT A/C DR                             3,77,400  

  DISABILITY BENEFIT A/C DR                                82,020  

  REFUND TO NON VESTED TERMINATED EMPLOYEES A/C DR 39,800  

  TO ANNUITY BENEFIT PAYABLE A/C                               3,77,400

  TO DISABILITY BENEFIT PAYABLE A/C                                  82,020

  TO REFUND TO NON VESTED TERMINATED EMPLOYEES PAYABLE A/C                                                      39,800

 (BEING LIABILITIES RECORDED)  

6.ACCOUNTS PAYABLE A/C DR                         5,07,500  

  TO CASH A/C                                                                  5,07,500

  (BEING ACCOUNTS PAYABLE PAID)  

7.CASH A/C DR                                                        5,06,800  

  TO INVESTMENT IN COMMON STOCK A/C                     5,05,000

  TO PROFIT ON SALE OF COMMON STOCK A/C                    1,800

  (BEING INVESTMENT IN COMMON STOCK SOLD)  

  INVESTMENT IN COMMON STOCK A/C DR        5,02,000  

  TO CASH A/C                                                                      5,02,000

  (BEING AMOUNT INVESTED IN A DIFFERENT COMMON STOCK)  

8.INVESTMENT IN BONDS A/C DR                             12,750  

  TO INVESTMENT IN COMMON STOCK A/C                           5,770

  TO PROFIT AND LOSS A/C                                                   6,980

  (BEING INVESTMENTS RECORDED AT MARKET VALUE)

Explanation:

All payments underlined are under "credits" while those not underlined are "debits"