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16 July, 08:02

Big City provides a defined benefit pension plan for employees of the city water department, an enterprise fund. Assume that the service cost component is $420,000, and interest on the pension liability is $380,000 for the year. Actual returns on plan assets for the year were $300,000 while the projected level of earnings on plan investments was $360,000. This difference is to be amortized over a 5 year period, beginning this year. Finally assume the City is amortizing a deferred inflow resulting from a change in plan assumptions from a prior year in the amount of $10,000 per year. Prepare journal entries to record annual pension expense for the enterprise fund.

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  1. 16 July, 08:05
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    Solution:

    Journal entries to record annual pension expense for the enterprise fund:

    Service cost $420,000

    Interest $380,000

    Cash 800,000

    Plan assets - pension 800,000

    Service cost 420,000

    Interest 380,000
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