Question

2. 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. Required: Prepare journal entries to record annual pension expense for the enterprise fund.

	Account	DR	CR
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Answer 1

Answer
Journal Entry
DATE	Account titles and explanations	Debit ($)	Credit ($)
	Service costs	$       4,20,000
	Interest	$       3,80,000
	To, Bank		$       8,00,000
	(To record the pension expenses paid)
	Plan assets (Pension)	$       8,00,000
	To, Service costs		$       4,20,000
	To, Interest		$       3,80,000
	(To record the expenses adjusted against the plan assets)

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