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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Vacation pay and pension benefits

Fukushima Company provides its employees with vacation benefits and a defined contribution pension plan. Employees earned vacation pay of $19,500 for the period. The pension plan requires a contribution to the plan administrator equal to 6% of employee salaries. Salaries were $260,000 during the period, and the full amount due was contributed to the pension plan administrator.

Provide the journal entry for 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

  • Vacation pay expense is an expense and it decreases the equity value. So, debit it by $19,500...

B.

To determine

To journalize: Pension benefit.

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