Jabara
Limited provides a defined contribution pension plan for its employees. The
plan requires the company to deduct 5% of each employee’s gross pay for each
payroll period as the employee contribution. The company then matches this
amount by an equal contribution. Both amounts are remitted to the pension trustee
within 10 days of the end of each month for the previous month’s payrolls. At
November 30, 2011, Jabara reported $26,300 of combined withheld and matched
contributions owing to the trustee. During December, Jabara reported gross salaries
and wages of $276,100.
Instructions
(a)
Prepare the entry to record the December payment to the plan trustee.
(b)
What amount of pension expense will the company report for December 2011?
(c)
Determine the appropriate pension account and its balance to be reported on the
December 31, 2011 balance sheet.
(a) Pension Contributions Payable.......... 26,300
Cash.............................. 26,300
(b)
Pension Expense for December 2011:
$276,100 x 5% = $13,805
(c)
Current liability:
Pension Contributions Payable ($13,805 x 2) $ 27,610
This assumes amounts for previous months were
remitted as required each month. At
December 31, 2011 all that remains payable is the amount withheld from
employees in December and the required employer matching amount.
