Characteristics of Profit- Sharing Plans Include All of the Following

question 131

Multiple Choice

Characteristics of profit- sharing plans include all of the following with the exception of:

• A) A predetermined formula is used to allocate employer contributions to individual employees and to establish benefit payments.
• B) The company must make contributions to the plan if it has profits during the year.
• C) Forfeitures of benefits under the plan may be reallocated to the remaining participants.
• D) Annual employer contributions are not required, but substantial, recurring contributions must be made to satisfy the requirement that the plan be permanent.

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Definitions:

Adjusting Entry

Refers to adjustments made in the books of accounts to record expenses or revenues that have occurred but are not accurately represented in financial statements.

Write Off

The act of removing an asset from the financial statements due to its impairment or irrelevance, recognizing it as a loss.

Estimated Bad Debts

An account on the financial statements estimating the amount of receivables that a company does not expect to collect.

Percentage of Sales Method

An accounting technique used to estimate bad debts or the allowance for doubtful accounts based on a predetermined percentage of sales.