Which of the Following Statements Concerning Nonqualified Deferred Compensation Plans

question 40

Multiple Choice

Which of the following statements concerning nonqualified deferred compensation plans is true?

• A)If an employer doesn't have the funds to pay the employee,the employee becomes an unsecured creditor of the employer.
• B)These plans can be an important tax planning tool for employers if they expect their marginal tax rate to decrease over time.
• C)These plans can be an important tax planning tool for employees who expect their marginal tax rate to increase over time.
• D)Distributions are taxed at the same tax rate as long-term capital gains.

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Definitions:

Prepaid Expenses

Costs paid in advance for goods or services that will be used or consumed over time, recorded as assets on the balance sheet.

Accrued Expenses

Expenses that have been incurred but not yet paid or recorded at the end of a reporting period.

Unearned Revenue

Money received by an individual or company for a service or product that has yet to be provided or delivered.

Adjusting Entry

A journal entry made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.