ACCT 567 Week 5 Case Study City of Shipley

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The City of Shipley maintains an Employee Retirement Fund; a single-employer, defined benefit plan that provides annuity and disability benefits. The fund is financed by a process that makes actuarially determined contributions from the city’s General Fund and by contributions that are made by the employees. The General Fund is handling the administration of the retirement fund and it does not have any administrative expenses. The Statement of Net Assets for the Employees’ Retirement Fund as of July 1, 2011 is shown below:

City of Shipley

Employees Retirement Fund

Statement of Net Assets

As of July 1, 2011


Cash $ 60,000

Accrued Interest Receivable 160,000

Investments, at fair value

Bonds 5,500,000

Common Stock 1,600,000

Total Assets $ 7,320,000


Accounts Payable and Accrued Expenses 430,000

Net Assets Held in Trust for Pension Benefits $ 6,890,000

The following transactions took place during the fiscal year 2012:

The interest receivable on investments was collected in cash. Member contributions in the amount of $ 460,000 were received in cash, the city’s General Fund also contributed $ 700,000 in cash. Annuity benefits of $ 780,000 and disability benefits of $ 200,000 were recorded as liabilities. Accounts payable and accrued expenses in the amount of $ 820,000 were paid in cash. Interest income of $ 320,000 and dividends in the amount of $60,000 were received in cash. Bond Interest Income of $ 160,000 was accrued at the end of year. Refunds of $ 150,000 were made in cash to terminated, non-vested participating employees. Common stocks, which are carried at a fair value of $ 500,000, were sold for $472,000. The amount of the sales price of the stock plus an additional $ 360,000 was invested in stocks. As of the end of the fiscal year, June 30, 2012, a determination has been made that the fair value of the stocks held by the pension plan had decreased by $ 60,000; the fair value of bonds had increased by $35,000. Temporary accounts for the year were closed.


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