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Chaptter 25

Chaapter 117

Exxampple 1

An entity makkes contribuutions to thhe pensionn fund of emmployees aat a rate of
5% of gross ssalary. The contributioons made are $10,0000 per monnth for
connvenience wwith the baalance beinng contribuuted in the first monthh of the
folloowing accoounting yeaar. The waages and salaries for 20X6 are $2.7m.

Reqquired:
Calculate thee pension expense ffor 20X6 aand the acccrual/preppayment aat
the end of the year.
Solution

Thee charge too the statemment of proofit or loss should be:
$2.77m × 5% = $135,000

Thee statemennt of financial positionn will thereffore show an accrual of $15,0000,
beinng the diffeerence betwween the $$135,000 aand the $120,000 paid in the yeear.

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