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.

Question

Business

Piper Howe

5 August, 20:08

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.

+5

Answers (1)

Know the Answer?

Cristopher Costa · Answer 1

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.