Jabara Limited provides a defined contribution pension plan for its employees. The plan requires the company to deduct 5% of each employee’s gross pay for each payroll period as the employee contribution. The company then matches this amount by an equal contribution. Both amounts are remitted to the pension trustee within 10 days of the end of each month for the previous month’s payrolls. At November 30, 2011, Jabara reported $26,300 of combined withheld and matched contributions owing to the trustee. During December, Jabara reported gross salaries and wages of $276,100.
Instructions
(a) Prepare the entry to
record the December payment to the plan trustee.
(b) What amount of pension
expense will the company report for December 2011?
(c) Determine the
appropriate pension account and its balance to be reported on the December 31,
2011 balance sheet.
(a)
Pension Contributions
Payable.......... 26,300
Cash..............................
26,300
(b)Pension Expense for December
2011:
$276,100 x 5% =
$13,805
(c)Current liability:
Pension Contributions Payable ($13,805 x
2) $ 27,610
This assumes amounts for
previous months were remitted as required each month. At December 31, 2011 all
that remains payable is the amount withheld from employees in December and the
required employer matching amount.
At December 31, 2011, Glover
Corporation has the following balances:
Accrued benefit obligation
…………………….. $3,400,000
Plan assets at fair value
………………………… 2,420,000
Unrecognized past service
cost ………………… 990,000
Determine the account and
its balances that should be reported on Glover Corporation’s December 31, 2011
balance sheet if it is using the deferral and amortization
approach.
Accrued benefit
obligation $3,400,000
Fair value of plan
assets 2,420,000
Funded status – net
liability 980,000
Unrecognized past service
cost (debit) 990,000
Accrued pension asset
(debit) $ 10,000
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