Bartov Corporation has a defined contribution pension plan for its employees. Ea
ID: 2421751 • Letter: B
Question
Bartov Corporation has a defined contribution pension plan for its employees. Each year, Bartov contributes to the plan an amount equal to 4% of the employee payroll for the year. Bartov's 2013 payroll was $400,000. Bartov also provides a life insurance benefit that pays a $50,000 death benefit to the beneficiaries of retired employees. At the end of 2013, Bartov estimates that its liability under the life insurance program is $625,000. Bartov has assets with a fair value of $175,000 in a trust fund that are available to meet the death benefit payments. Required a. Prepare the journal entry at December 31, 2013, to record Bartov's 2013 defined contribution to a pension trustee who will manage the pension funds for the firm's employees. Description Debit Credit Answer Answer Answer Answer Answer Answer b. What amount of liability for death benefit payments must Bartov report in its December 31, 2013, balance sheet? $ Answer
Explanation / Answer
1.
Payroll for 2013 = $400,000
Annual contribution to pension fund = 4% of Payroll = $400,000 * 4% = $16,000
Description
Debit
Credit
Contribution to pension plan
$16,000
Payable to Pension trustee
$16,000
2.
Estimated Liability for death benefits = $625,000
Fair of value of assets = $175,000
Net liability to be reported = $625,000 - $175,000 = $450,000
Description
Debit
Credit
Contribution to pension plan
$16,000
Payable to Pension trustee
$16,000
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