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

Answer:

Employer's annual contribution = $60,000

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 )