Recorded pension expenditures are not always influenced by actuarial computations. Hayward City maintains a defined benefit pension plan for its employees. In a recent year, the city contributed $5 million to its pension fund. However, its annual pension cost as calculated by its actuary was $7 million. The city accounts for the pension contributions in a governmental fund. Record the pension expenditure in the appropriate fund.Suppose in the following year the city contributed $6 million to its pension fund, but its annual pension cost per its actuary was only $5 million. Prepare the appropriate journal entries.Briefly justify why you did, or did not, take into account the pension cost as calculated by the actuary.

The amount that a company charges to expense for its liabilities towards pensions payable to employees. 1. Particulars Amount (Dr.) Amount (Cr.) Pension expenditure $5,000,000 To Cash $5,000,000 (To record pension expenditure) [General fund] 2. Particulars Amount (Dr.) Amount (Cr.) Pension expenditure $6,000,000 To Cash $6,000,000 (To record pension expenditure) [General fund] 3. As specified city accounts for pension contributions in a government fund, - government funds are on the modified accrual basis, so the expenditure reported to the pension fund is the contributed amount. - Any excess pension cost over the contributed pension would not be recorded in any government fund. - Any difference of annual pension cost and pension expenditure is reported on the statement of net assets (government) and long-term liabilities schedule.

Answered: Recorded pension expenditures are not…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Recorded pension expenditures are not always influenced by actuarial computations.

Hayward City maintains a defined benefit pension plan for its employees. In a recent year, the city contributed $5 million to its pension fund. However, its annual pension cost as calculated by its actuary was $7 million. The city accounts for the pension contributions in a governmental fund.

Record the pension expenditure in the appropriate fund.
Suppose in the following year the city contributed $6 million to its pension fund, but its annual pension cost per its actuary was only $5 million. Prepare the appropriate journal entries.
Briefly justify why you did, or did not, take into account the pension cost as calculated by the actuary.

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