PE 11-6B Vacation pay and pension benefits

Wang Equipment Company provides its employees vacation benefits and a defined benefit pension plan. Employees earned vacation pay of $42,000 for the period. The pension formula calculated a pension cost of $273,000. Only $210,000 was contributed to the pension plan administrator.

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

Answer:
a.
Vacation Pay Expense.................................. 42,000  
          Vacation Pay Payable.................................. 42,000  
             Vacation pay accrued for the period.  

b.
Pension Expense ....................................... 273,000
          Cash................................................... 210,000
          Unfunded Pension Liability............................. 63,000  
              To record pension cost and funding.

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