In a Defined-Contribution Plan, a Formula Is Used That

question 22

Multiple Choice

In a defined-contribution plan, a formula is used that

• A) defines the benefits that the employee will receive at the time of retirement.
• B) ensures that pension expense and the cash funding amount will be different.
• C) requires an employer to contribute a certain sum each period based on the formula.
• D) ensures that employers are at risk to make sure funds are available at retirement.

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Definitions:

Net Income

The total earnings of a company after subtracting all expenses, including taxes and operating costs, indicating the profitability over a specified time period.

Total Assets

The sum of all assets owned by an entity, including both current and non-current assets.

Time Period Assumption

An accounting principle that assumes a business's complex and ongoing activities can be divided into shorter time periods, such as months, quarters, or years.

Prepaid Expense Account

An asset account that represents payments made in advance for goods or services to be received in the future.