Culver City recognized as revenues/expenditures those amounts collected/paid during the year or within 60 days of fiscal year-end.The City offers a pension benefit to its employees who meet certain age and years of employment criteria.The City participates in the State Pension Plan.The City's actuarially determined contribution to the State Pension Plan for the fiscal year ended 6/30/00 is $4 million.Due to cash inflow shortages the City, which budgeted $4 million for pension payments paid only $3 million in the fiscal year ended 6/30/00.The City made the final payment September 30, 2000.Assuming the City maintains its books and records in a manner that facilitates the preparation of the fund financial statements, what is the appropriate entry to record the pension payments and recognize any associated liability?

Question

Quizplus · Accepted Answer

Since the City recognized revenues/expenditures for amounts collected/paid during the year or within 60 days of fiscal year-end, the $1 million underpaid for the pension contribution would not be recognized as an expenditure until the next fiscal year. Therefore, the appropriate entry to record the $3 million payment would be to debit Expenditures for $3 million and credit Cash for $3 million. There is no need to recognize any associated liability since the remaining $1 million will be recognized as an expenditure in the next fiscal year.

Culver City Recognized as Revenues/expenditures Those Amounts Collected/paid During the Year