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Vacation pay and pension benefits Regling Company provides its employees vacation benefits and a defined benefit pension plan. Employees earned vacation pay of $35,000 for the period. The pension formula calculated a pension cost of $201,250. Only $175,000 was contributed to the pension plan administrator. Journalize the entry to record the (A) vacation pay and (B) pension benefit.

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Corporate Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305653535

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Section
BuyFindarrow_forward

Corporate Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305653535
Chapter 10, Problem 10.5BE
Textbook Problem
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Vacation pay and pension benefits

Regling Company provides its employees vacation benefits and a defined benefit pension plan. Employees earned vacation pay of $35,000 for the period. The pension formula calculated a pension cost of $201,250. Only $175,000 was contributed to the pension plan administrator. Journalize the entry to record the (A) vacation pay and (B) pension benefit.

A.

To determine

Vacation expense: Vacation expense is an estimated expense for the company which the company should pay to the employees as extra salary over the entire year. For example: If an employee works 49 weeks in a year, company should pay 3 weeks’ (52 weeks  49 weeks) extra salary as a vacation expense.

To journalize: Vacation pay expense.

Explanation of Solution

  • Vacation pay expense is an expense and it decreases the equity value. So, debit it by $35,000...

B.

To determine

To journalize: Pension benefit.

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Chapter 10 Solutions

Corporate Financial Accounting
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