Which of the Following Statements Concerning Drafts Is (Are) Correct

question 35

Multiple Choice

Which of the following statements concerning drafts is (are) correct?
I. Drafts require the firm to keep larger balances in its disbursement account.
II. When a draft is transmitted to the firm's bank for collection, the bank must present the draft to the firm for acceptance before payment is made.

• A) Only statement I is correct.
• B) Only statement II is correct.
• C) Both statements I and II are correct.
• D) Neither statement I nor II is correct.

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Definitions:

Plan Assets

Assets that are held by a retirement plan, which can include stocks, bonds, and cash, intended to fund the future benefit payments to participants.

Defined Benefit Pension Plan

A retirement plan where employer commitments are based on a formula considering factors like salary history and duration of employment, with the company bearing investment risk.

Prior Service Cost Amortization

The process of expensing the costs of retroactive benefits granted in a pension plan over a period of time.

Actuarially Determined Discount Rate

This refers to the interest rate used in the actuarial valuation to discount future pension obligations to present value, reflecting the expected rate at which the pension plan's liabilities can be funded or settled.