The journal entry a company uses to record pension rights that have not been funded for its salaried employees, at the end of the year is
A) debit Salary Expense; credit Cash
B) debit Pension Expense; credit Unfunded Pension Liability
C) debit Pension Expense; credit Unfunded Pension Liability and Cash
D) debit Pension Expense; credit Cash

Question

Quizplus · Accepted Answer

The journal entry to record pension rights that have not been funded for salaried employees involves debiting Pension Expense and crediting Unfunded Pension Liability. This is because the company is recognizing an expense in the form of the pension contribution owed to its employees but has not yet made the payment, resulting in an increase in the unfunded pension liability account. Choice A is incorrect because it debits Salary Expense instead of Pension Expense. Choice C is incorrect because it includes a cash credit, which is not required as there is no cash transaction involved in unfunded pension liabilities. Choice D is incorrect because it credits cash, which is not applicable in this scenario.

The Journal Entry a Company Uses to Record Pension Rights