Question

Smith Corp. sponsors a 401(k) plan for all its full-time employees. The company contributes 3% of each employee's salary to the plan. The total payroll for the year was $2 million. When recognizing the employer's annual contribution, Smith should

Answer 1

Employer's annual contribution = $60,000

Step-by-step explanation:

Given:

Employer's annual contribution = 3% = 3/100 = 0.03

Total payroll = $2,000,000

Computation:

Employer's annual contribution = Total payroll × 0.03

Employer's annual contribution = $2,000,000 × 0.03

Employer's annual contribution = $60,000

Journal Entry

Date Account Title and Explanation Debit Credit

Employee pension expense A\c Dr. $60,000

Cash A\c Cr. $60,000

(Being Employee pension expense debited )