In 2015, the Bakersville Independent School District incurred $12 million in expenditures for teachers’ salary and benefits. In that year, the legislature of the state in which the district is located voted to enhance the pension benefits of all teachers in the state by making a one-time supplementary contribution to the teachers’ retirement fund of each independent school district in an amount equal to 2 percent of teachers’ salaries. This amount would be in addition to the contributions currently made by the school districts themselves.
As a result of this measure, the state contributed $240,000 on behalf of teachers in the Bakersville district.
1. How would the state’s contribution to the pension fund be accounted for on the books of Bakersville? Prepare a summary journal entry (if required).
2. In the 2016 election for school board, one of the candidates charged that the incumbent board had promised to hold the line on school district spending. Yet despite its promises, the board increased expenditures on teachers’ compensation by 2 percent. Do you think the school district should be required to report the state’s contribution as an expenditure, even though the district did not make the payment and had no say on whether it should be made? Would your response be different if the state had given the district a cash grant of $240,000 with the requirement that the money be used to increase the district’s contribution to the Teachers’ Retirement Fund?
3. Suppose instead that the state made a contribution of $240,000 to the Teachers’ Retirement Fund on behalf of the school district. This contribution enabled the district to reduce its payment from what it had previously been and for which the school district is legally responsible. Do you think that the district should be required to report the state’s contribution as an expenditure?

  • CreatedAugust 13, 2014
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