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Martin Services Company provides its employees vacation benefits and a defined contribution pension plan. Employees earned vacation pay of $49,000 for the period. The pension plan requires a contribution to the plan administrator equal to 6% of employee salaries. Salaries were $500,000 during the period. a. Provide the journal entry for the vacation pay. b. Provide the journal entry for the pension benefit.

Respuesta :

ladeitan

Answer:

a. Provide the journal entry for the vacation pay

Debit Vacation and Holiday expense $49,000

Credit Vacation and Holiday  payable $49,000

(To record earned Vacation and Holiday expenses)

b. Provide the journal entry for the pension benefit

Debit Pension expense $30,000

Credit Pension liability  $30,000

(Being pension benefit recognition)

Explanation:

  • The earned vacation and holiday expense has to be recognized in line with the accrual principle of accounting.
  • The pension benefit was also recognized in line with the accrual principle of account. The pension plan is a contribution of 6% of employee salaries, which amounted to $500,000. So, 0.06 x 500,000 = $30,000.

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