Question

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.

Answer 1

Answer:

Date	Particulars	Debit ($)	Credit ($)
	Service cost	$420,000
	Interest	$380,000
	Bank		$800,000
	(Being the person expenses paid )
	Plan assets - pension	$800,000
	Service cost		$420,000
	Interest		$380,000
	(Being the expenses adjusted against plan assets