Question

1. Deidre has five years of service completed as of February 5, 2018, her employment anniversary date. If the defined benefit plan uses the cliff vesting schedule, determine Deidre’s nonforfeitable percentage.

	a.	100%
	b.	60%
	c.	80%
	d.	0%

2.

Stuart owns 2,000 shares of Blue Corporation stock. During the year, Stuart received 100 shares of Blue Corporation stock as a result of a 5% stock dividend. Stuart did not have the option of receiving cash from Blue. The additional shares he received had a value of $7,200. Stuart’s gross income from the receipt of the additional Blue shares is:

	a.	$7,200
	b.	$4,800
	c.	$0
	d.	$12,000

Answer 1

1. A. 100%

In cliff vesting schedule, once employee completes cliff period, he/she become entitiled to receive full benefit. Generally plan have 4 years of vesting schedule plan with one year of cliff. Therefore she receives 100% benefit.

2. C.0

When company issues stock dividend, the market price of the stock decrease accordingly and it will not result into any income. For example, if A has 100 shares having value of 10 each. If he received 20% stock dividend, number of shares become 120 but price becomes 8.33. So, before dividend value was 1000 (100×10) and same value remains after dividend. 1000 (120×8.33)