PE 11-6A Vacation pay and pension benefits

Lutes Company provides its employees with vacation benefits and a defined contribution pension plan. Employees earned vacation pay of $25,500 for the period. The pension plan requires a contribution to the plan administrator equal to 8% of employee salaries. Salaries were $340,000 during the period.

Provide the journal entry for the (a) vacation pay and (b) pension benefit.

Answer:
a.
Vacation Pay Expense................................. 25,500  
           Vacation Pay Payable................................  25,500  
               Vacation pay accrued for the period.  

b.
Pension Expense ...................................... 27,200
           Cash.................................................. 27,200
             To record pension contribution,    
             8% × $340,000.

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