Question

The City of Sweetwater maintains an Employees’ Retirement Fund, a single employer defined benefit plan that provides annuity and disability benefits. The fund is financed by actuarially determined contributions from the city’s General Fund and by contributions from employees. Administration of the retirement fund is handled by General Fund employees, and the retirement fund does not bear any administrative expenses. The Statement of Fiduciary Net Position for the Employees’ Retirement Fund as of July 1, 2016, is shown here:

CITY OF SWEETWATER
Employees’ Retirement Fund
Statement of Fiduciary Net Position
As of July 1, 2016
Assets
Cash	$	139,000
Accrued Interest Receivable		58,600
Investments, at Fair Value:
Bonds		4,508,000
Common Stocks		1,310,000
Total Assets		6,015,600
Liabilities
Accounts Payable and Accrued Expenses		351,800
Fiduciary Net Position Restricted for Pensions	$	5,663,800

During the year ended June 30, 2017, the following transactions occurred:

1. The interest receivable on investments was collected in cash.
2. Member contributions in the amount of $276,500 were received in cash. The city’s General Fund also contributed $810,000 in cash.
3. Annuity benefits of $738,000 and disability benefits of $166,000 were recorded as liabilities.
4. Accounts payable and accrued expenses in the amount of $959,000 were paid in cash.
5. Interest income of $246,000 and dividends in the amount of $30,500 were received in cash. In addition, bond interest income of $54,000 was accrued at year-end.
6. Refunds of $88,000 were made in cash to terminated, nonvested participants.
7. Common stocks, carried at a fair value of $509,000, were sold for $485,000. That $485,000, plus an additional $314,000, was invested in stocks.
8. At year-end, it was determined that the fair value of stocks held by the pension plan had decreased by $50,000; the fair value of bonds had increased by $43,000.
9. Nominal accounts for the year were closed.
   

Required:
a. Record the transactions on the books of the Employees’ Retirement Fund.
b. Prepare a Statement of Changes in Fiduciary Net Position for the Employees’ Retirement Fund for the year ended June 30, 2017.
c. Prepare a Statement of Fiduciary Net Position for the Employees’ Retirement Fund as of June 30, 2017.

Answer 1

City of Sweetwater Journal Enteries Trans. Particulars 1 Cash a/c Dr. To Accrued Interest Receivable Debit in $ Credit in $ 58600 58600 1086500 Cash a/c Dr. To Additions-Contributions-Plan Members To Additions-Contributions-Employer 276500 810000 3 Deductions Annuity Benefits a/c Dr. Deduction-Disability Benefits a/c Dr. To Accounts Payable and Accrued Expenses 738000 166000 904000 959000 Accounts Payable and Accrued Expenses a/c Dr. To Cash 959000 5 Dr. 276500 54000 Cash a/c Accrued Interest Receivable a/c Dr. To Additions-Investment Earnings-Interest To Additions-Investment Earnings-Dividends 300000 30500 6 88000 Deductions-Refunds to Terminated Employees a/c Dr. To Cash 88000 7 Cash a/c Dr. Additions-Investment Earnings-Change in FV of Investments a/c Dr. To Investments in Common Stock 485000 24000 509000 Dr. 799000 Investments in Common Stocks a/c To Cash 485000 + 314000 799000 8 Investments in Bonds a/c Dr. Additions-Investment Earnings-Change in FV of Investments a/c Dr. To Investments in Common Stock 43000 7000 50000 276500 810000 300000 30500 Additions-Contributions-Plan Members a/c Dr. Additions-Contributions-Employer a/c Dr. Additions-Investment Earnings-Interest a/c Dr. Additions-Investment Earnings-Dividends a/c Dr. To Additions-Investment Earnings-Change in FV of Investments To Deductions Annuity Benefits To Deduction-Disability Benefits To Deductions-Refunds to Terminated Employees To Net Assets Held in Trust for Pension Benefits 31000 738000 166000 88000 394000

810000 276500 1086500 Employees' Retirement Fund Statement of Changes in Plan Net Assets For the Year Ended June 30, 2017 Additions Contributions Contributions-Employer Contributions Members Total Contributions Investment Earnings Interest Dividends Net Change in Fair Value of Investments Total Investment Earnings Total Additions Deductions Annuity Benefits Disability Benefits Refunds to Terminated Employees Total Deductions Increase in Net Assets Net Assets, Held in Trust for Pension Benefits, Beginning Net Assets, Held in Trust for Pension Benefits, Ending 300000 30500 -31000 299500 1386000 738000 166000 88000 992000 394000 5663800 6057800 Employees' Retirement Fund Statement of Net Assets For the Year Ended June 30, 2017 Assets Cash Accrued Interest Receivable Investments in Bonds, at fair value Investments in Stocks, at fair value Total Assets Liabilities Accounts Payable and Accrued Expenses Net Assets Held in Trust for Pension Benefits 199600 54000 4551000 1550000 6354600 296800 6057800 0