Chapter 16, Problem 16.14P

To determine

Employee Trust Fund:

An employee trust fund is a form of a long term saving plan established as a job benefit. Both the employer and the employee may contribute to an employee trust fund. The best-known forms of employee trust fund are the stock ownership plan and the pension plan.

: Preparation of statement of plan net position and a statement of changes in plan net position of the Employees Retirement System Fund for the year ended June 30, 2018

Answer to Problem 16.14P

Net Assets held in trust for pension benefits are equal to $540,000 and Net increase from the statement of changes in Plan Net Assets is equal to $76,000.

Explanation of Solution

Preparation of a statement of plan net assets of the Employees Retirement System Fund for the city B’s as shown below:

City B’s Employees Retirement System FundStatement of plan net assetsAs on June 30, 2018
Assets	Amount ($)	Amount ($)
Cash and short-term investments		38,000
Receivables:
Due from the city	4,000
Interest receivable	5,000
Total Receivables		9,000
Investment, at fair value		497,000
Total Assets		544,000
Liabilities	Amount ($)	Amount ($)
Refunds payable (Due to resigned employees)	1,000
Annuities payable	3,000
Total Liabilities		4,000
Net Assets held in trust for pension benefits		540,000

Preparation of a statement of changes in plan net assets of the Employees Retirement System Fund for the city B’s as shown below:

City B’s Employees Retirement System FundStatement of changes in plan net assetsAs on June 30, 2018
Particulars	Amount ($)	Amount ($)
Additions
Contributions:
Employer (Note:1)	20,000
Plan members (Note:2)	32,000
Total Contributions		52,000
Investment Income:
Net appreciation (depreciation) in fair value	13,500
Investment earnings received	30,000
Accrued earnings at year-end	5,000
Net Investment Income		48,500
Total additions		100,500
Deductions:
Annuities paid during the year	13,000
Annuities payable at year-end	3,000
Refund made during the year	2,500
Due to resigned employees at year-end	1,000
Administrative expenses	5,000
Total Deductions		24,500
Net Increase (Net Investment Income-Total Deductions)		76,000
Net assets held in trust for pension benefits:
Beginning of the year (July 1, 2017)		464,000
End of the year (July 1, 2018)		5,40,000

Notes:

1. Contribution from Employer = Amount received from employer + Amount due from the city
At year end

= $16,000 + $4,000

= $20,000

2. Amounts received from employees are considered as plan members.