Question

Martin Services Company provides its employees vacation benefits and a defined contribution pension plan. Employees earned vacation pay of $49,000 for the period. The pension plan requires a contribution to the plan administrator equal to 6% 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

a. Provide the journal entry for the vacation pay

Debit Vacation and Holiday expense $49,000

Credit Vacation and Holiday payable $49,000

(To record earned Vacation and Holiday expenses)

b. Provide the journal entry for the pension benefit

Debit Pension expense $30,000

Credit Pension liability $30,000

(Being pension benefit recognition)

Step-by-step explanation:

• The earned vacation and holiday expense has to be recognized in line with the accrual principle of accounting.
• The pension benefit was also recognized in line with the accrual principle of account. The pension plan is a contribution of 6% of employee salaries, which amounted to $500,000. So, 0.06 x 500,000 = $30,000.