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.

Respuesta :

Solution:

Journal entries to record annual pension expense for the enterprise fund :

Service cost                     $420,000

Interest                            $380,000

Cash                                              800,000  

Plan assets - pension    800,000  

Service cost                                     420,000

Interest                                            380,000