Question

1) Which of the following is not a characteristic of a qualified pension plan?

A) It can be limited to highly compensated salaried employees.

B) It must be funded in advance of retirement.

C) Benefits must vest after a specified period of service.

D) It must cover at least 70% of employees.

2) We classify a lease as a finance lease if:

A) the present value of lease payments is less than the asset's book value.

B) the present value of lease payments is less than the asset's fair value.

C) the lessee obtains control of the use of the asset.

D) the usual risks and rewards are retained by the lessor.

3) Which of the following circumstances creates a future taxable amount?

A) Service fees collected in advance from customers: taxable when received, recognized for financial reporting when earned.

B) Accrued compensation costs for future payments.

C) Straight-line depreciation for financial reporting and accelerated depreciation for tax reporting.

D) Investment expenses incurred to obtain tax-exempt income (not tax deductible).

4) Which of the following describes defined benefit pension plans?

A) They raise few accounting issues for employers.

B) Retirement benefits depend on how much money has accumulated in an individual's account.

C) They are simple to construct.

D) Retirement benefits are based on the plan benefit formula.

Answer 1