Sheet1Case Study-Week 511/30/201 2City of Shipley Employees Retirement FundPart A General JournalDebit Credit1 Cash 160,000 Accrued Interest Receivable 160,000 2 Cash 1,160,000 Additions-Member Contirbutions 460,000 Additions-Employer Contributions 700,000 3 Deductions-Annuity Benefits 780,000 Deductions-Disability Benefits 200,000 Account Payable and Accrued Expenses 980,000 4 Accounts Payable and Accrued Expenses 820,000 Cash 820,000 5 Cash 380,000 Additions-Investment Income-Interest 320,000 Additions-Investment Income-Dividends 60,000 6 Accrued Interest Receivable 160,000 Additions-Investment Income-Interest 160,000 7 Deductions-Refunds to Terminated Employees 150,000 Cash 150,000 8 Cash 472,000 Deductions-Change in Fair Value of Investment 28,000 Investment in Common Stock 500,000 Investment in Common Stock 832,000 Cash 832,000 9 Investment in Bonds 35,000 Deductions-Change in Fair Value of Investments 25,000 Investment in Common Stock 60,000 10 Additions-Member Constributions 460,000 Additions-Employer Contributions 700,000 Additions-Investment Income-Interest 480,000 Additions-Investment Income-Dividends 60,000 Deductions-Annuity Benefits 780,000 Deductions-Disability Benefits 200,000 Deductions-Refunds to Terminated Eployees 150,000 Deductions-Change in Fair Value of Investments 53,000 Net Assets Held in Trust for Pension Benefits 517,000 City of ShipleyEmployees Retirement fund Statement of Changes in Plan Net Assets Part B For the Fiscal Year Ended June 30, 2012 Additions: Contributions: Employer $ 700,000 Plan Member 460,000 Total Contributions $ 1,160,000 Investment Income: Interest $ 480,000 Dividends 60,000 Net decrease in Fair Value of Investments (53,000) Total Investment Income $ 487,000 Total Additions $ 1,647,000 Deductions: Annuity benefits $ 780,000 Disability Benefits 200,000 Refunds to Terminated Employees 150,000 Total Deductions $ 1,130,000 Net Increase 517,000 Net Assets Held in trust for Pension Benefits-July 1, 2011 6,890,000 Net Assets Held in trust for Pension Benefits-June 30, 2012 $ 7,407,000 City of ShipleyEmployee's Retirement FundStatement of Net AssetsPart C As of June 30, 2012Assets:Cash 430,000 - Accrued Interest Receivable 160,000 Investments, at Fair Value Bonds 5,535,000 Common Stock 1,872,000 Total Assets 7,997,000 Liabilities:Account Payable and Accrued Expenses 590,000 Net Assets Held in Trust for Pension Benefits $ 7,407,000 Part DOne of the main differences between a defined benefit plan and defined contribution plan is that the employer is the beneficiary of a defined benefit trust and employees are the beneficiaries of a definedcontribution trust. A Defined Benefit Plan provides retirement benefits to retired employees based on a multiple of numberof years of service and a percentage of their salary for some specified period before retirement. Reporting for Defined Benefit Pension Plans requires two financial statements, such as Statement ofPlan Net Assets and Statement fo Changes in Plan Net Assets. It also requires two supplementaryschedules: the Schedule of Funding Progress and the Schedule of Employers Contributions.Defined Benefit Plan most commonly results in an unfunded acturial liability.A Defined Contribution Plan is a pension plan that is required to pay out only the amount that has beenaccumulated for each employee. In other words, defined contribution plans provide retirement fundsbased on known employee and employer contributions plus investment income on those funds. There is a limit how much an employer and/or employee may contribute to and employee's definedcontribution account per year. The limit various based upon the employer's policy.Both plans are generally classified as employer-provided qualifid retirement plans and have similarrules for vesting and required distributions. For an employee the advantage of a defined benefit plan is knowing what the payout will be at retirementgiven a certain amount of years of service. Therefore, a defined benefit plan shifts investment risk to theemployer. However, if the employer is not able to fund or pay for the benefits, the employee may notever receive the reteriment benefits from a defined benefit plan. Many of the disadvanteges of defined benefit plans are faced by the employer. Employers are required to fund the plans. The contributions required to fund a plan are dependent upon actuarial and managementestimates. This process can become very cumbersome and expensive for the employer. Also, because theemployer is required to provide a certain benefit for the employee, the employer must bear the investmentrisk. Many employers are now moving towards defined contribution plans due to the significant nontax advantages. Employers are not required make costly estimates to fund a contribution plan-they simplymake the contribution they have committed to make. Also, employers do not bear the investment risk of the investments.For defined contribution plans, employees generally have some direction over the way in which contributions are invested and also reap all the benefits of positive market conditions or good investments."Across the country, state and local governments are challenged with balancing the need to provide reasonable retirement benefits for their employees with the need to provide those benefits at reasonable costs to their taxpayers under the defined benefit plan. Changes in the economy and changes in regulationsare the main resons for the decline in defined benefit plans. In fact, the number of defined benefit plansreached a peak in 1985 and has declined continuously since then. Underfunding resulted because of losses incurred in pension investments. In the same manner, veryoptimistic assumptions on the growth of investments have led to the deferral of pension payments and to the increase in the number of beneficiaries without matching increases in contributions. Reducing Benefits: 35 states have reduced pension benefits, mostly for future employees due to legal provisions