Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Question
Chapter 19, Problem 2DQ
To determine
Specify whether the given statements is applied to a pension plan (P), a profit sharing plan (PS), both (B), or neither (N).
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It is a type of retirement plan where the benefit to be received by the employee is dependent on the contributions made to the plan and on the investment performance of the plan. The risk that the benefits to be received may be insufficient is retained by the employee.
a. Defined contribution plan
b. Defined benefit plan
c. none of the above
d. a or b
A pension plan is underfunded when the employer’s obligation (PBO) exceeds the resources available to satisfy that obligation (plan assets) and overfunded when the opposite is the case. How is this funded status reported on the balance sheet if plan assets exceed the PBO? If the PBO exceeds plan assets?
S1: Under a defined contribution plan, the amount of a participant’s future benefits is determined by the contributions paid by the employer, the participant, or both, and the operating efficiency and investment earnings of the fund.
S2: Under a defined benefit plan, the payment of promised retirement benefits depends on the financial position of the plan and the ability of contributors to make future contributions to the plan as well as the investment performance and operating efficiency of the plan.
Only S1 is true
None is true
Only S2 is true
Both are true
Chapter 19 Solutions
Individual Income Taxes
Ch. 19 - Prob. 1DQCh. 19 - Prob. 2DQCh. 19 - Prob. 3DQCh. 19 - Prob. 4DQCh. 19 - Prob. 5DQCh. 19 - Prob. 6DQCh. 19 - Prob. 7DQCh. 19 - Prob. 8DQCh. 19 - Prob. 9DQCh. 19 - Prob. 10DQ
Ch. 19 - Prob. 11DQCh. 19 - Prob. 12DQCh. 19 - Prob. 13DQCh. 19 - Prob. 14CECh. 19 - Prob. 15CECh. 19 - Prob. 16CECh. 19 - Prob. 17CECh. 19 - Zack, a sole proprietor, has earned income of...Ch. 19 - Prob. 19CECh. 19 - Prob. 20CECh. 19 - Prob. 21CECh. 19 - Prob. 22CECh. 19 - Prob. 23CECh. 19 - Prob. 24CECh. 19 - Prob. 25CECh. 19 - On April 5, 2017, Gustavo was granted an NQSO for...Ch. 19 - Prob. 27PCh. 19 - Prob. 28PCh. 19 - Prob. 29PCh. 19 - Prob. 30PCh. 19 - Prob. 31PCh. 19 - Prob. 32PCh. 19 - Prob. 33PCh. 19 - Prob. 34PCh. 19 - In 2019, Magenta Corporation paid compensation of...Ch. 19 - Prob. 36PCh. 19 - Prob. 37PCh. 19 - Prob. 38PCh. 19 - Prob. 39PCh. 19 - Prob. 40PCh. 19 - Prob. 41PCh. 19 - Prob. 42PCh. 19 - Prob. 43PCh. 19 - Prob. 44PCh. 19 - Carri and Dane, ages 34 and 32, respectively, have...Ch. 19 - Prob. 46PCh. 19 - Prob. 47PCh. 19 - Prob. 48PCh. 19 - Prob. 49PCh. 19 - Prob. 50PCh. 19 - Prob. 51PCh. 19 - Prob. 52PCh. 19 - Prob. 53PCh. 19 - Prob. 54PCh. 19 - Prob. 55PCh. 19 - Prob. 56PCh. 19 - Prob. 57PCh. 19 - Prob. 1RPCh. 19 - Prob. 2RPCh. 19 - Prob. 3RPCh. 19 - Prob. 6RPCh. 19 - Prob. 8RPCh. 19 - Prob. 1CPACh. 19 - Ryan is 39 years old and works as a real estate...Ch. 19 - Prob. 3CPACh. 19 - Prob. 4CPA
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- An increase in OCI related to plan assets occurs when: Select one: a. The accumulated benefit obligation is more than expected. b. The vested benefit obligation is less than expected. c. Retiree benefits paid out are less than expected. d. The return on plan assets is higher than expected. e. The employer contributes an amount greater than it was liable to do.arrow_forwardWhich of the following statements are disadvantages for the employer-sponsor of a cash balance pension plan? 1)A certain level of plan benefit is guaranteed by the PBGC. 2)The employer bears the investment risk in the plan. 3)Cash balance pension plans are less expensive for the employer than a traditional defined benefit pension plan. 4)Retirement benefits may be inadequate for older plan entrants Answer list below a) 2, 4 b) 1, 2 c) 1, 3 d) 3, 4arrow_forwardWhich of the following would not be reported on a plan's statement of fiduciary net position? A.) Obligations to retired employees that are past due B.) Plan investments at fair value C.) Actuarial accrued liabilities D.) Contributions receivable from employersarrow_forward
- Which of the following statements regarding asset ceilings for overfunded and underfunded pension plans is true? A. For underfunded pension plans, the issue is whether the sponsoring entity can realize the benefits of the underfunding either through reducing or stopping its contributions in the future or through withdrawing surplus funds. B. An overfunded pension results in a net defined benefit liability on the SFP. C. An underfunded pension has a fair value of plan assets that is less than the DBO. D. An asset ceiling is the minimum benefit that the employer can realize by reducing or stopping future contributions to a defined benefit pension plan.arrow_forwardAccounting Which of the following statements is not correct about defined contribution plans? A. The employer controls the investment choices on the employees' behalf. B. The promise is the amount of contributions the employer will make periodically. C.The size of payments depends on success of investments. D. No explicit promise is made about the size of the periodic benefits the employee will receive during retirement.arrow_forwardWhich of the following is not a characteristic of a defined-contribution pension plan? The employer's contribution each period is fixed. If the employer does not make contribution in full, then it reports a pension liability. If the employer contributes more than the required amount, then it reports a pension asset. An appropriate funding pattern must be established to ensure that the promised benefits at employees’ retirement will be met. The benefit of gain or the risk of loss from the assets contributed to the pension fund are borne by the employee.arrow_forward
- In case of Contributory Pension plans: (a) employer bears the entire cost. (b) employees voluntarily make payments to increase their benefits. (c) offer tax benefits. (d) All above 1. Cost of purchase does not include: (a) The purchase price. (b) Import duties. (c) The selling price. (d) Transportation costs. 2. Departure from lower- of -cost -or net realizable value (LCNRV) rule may be justified in situations when: (a) cost is difficult to determine. (b) items are readily marketable at quoted market prices. (c) units of product are interchangeable. (d) All above. 3. Premium on 6-month insurance policy during construction should be classified as the cost of: (a) Building. (b) Land. (c) Insurance premium (Expenses). (d) Land Improvement. 4. Computation of the depletion base involves: (a) Development costs. (b) Post-exploratory costs. (c) Acquisition cost. (d) Revaluation cost. 5. In case of Contributory Pension plans: (a) employer bears the entire cost. (b) employees voluntarily make…arrow_forwardA Defined Benefit Plan defines the following: O A. Your (employee) contributions to the plan B. The rate of return on assets (stocks, bonds, etc.) in the plan C. In most cases, is funded almost entirely by the employer D. Both A & C E. None of the abovearrow_forwardClassify each of the following independent statements as applying to a "Defined Contribution plan", "Defined Benefit plan", "Both" or "Neither" by selecting from the dropdown list. Type of Plan The amount to be received at retirement depends on actuarial calculations. Defined Benefit plan a. b. Forfeitures can be allocated to the remaining participants' accounts. c. Requires greater reporting requirements and more actuarial and administrative costs. d. May exclude employees who begin employment within five years of normal retirement age. e. Annual addition to each employee's account may not exceed the smaller of $58,000 or 100% of the employee's salary. f. The final benefit to a participant depends upon investment performance.arrow_forward
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