Question

Martin Services Company provides its employees vacation benefits and a defined contribution pension plan. Employees earned vacation pay of $48,000 for the period. The pension plan requires a contribution to the plan administrator equal to 5% 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.

Answer 1

On Vacation Pay Accrual:

Vacation Expense Account Dr 48000

To Vacation Payable Account 48000

On Vacation Pay taken by employees:

Vacation Payable Account Dr 48000

To Cash Account 48000

Contribution by Administrator- 5% of 500000 = 25000

On Pension Benefit Accrual:

Pension Expense Account Dr 25000

To Pension Payable Account 25000

On Pension Benefit Payment:

Pension Payable Account Dr 25000

To Cash Account 25000