Todd, Age 26 and Single, Is an Employee of the Ice

question 3

Essay

Todd, age 26 and single, is an employee of the Ice Corporation. Todd's annual salary is $50,000. Ice has a qualified pension into which employees may contribute 5% of their annual salary Todd contributes the maximum). The corporation also offers employees a flexible benefits plan. Todd pays $500 into the plan and is reimbursed for $500 of medical expenses not covered by his medical insurance. Ice also provides Todd with the following benefits:

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Definitions:

Adjusting Entry

A journal entry made at the end of an accounting period to allocate income and expenditure to the appropriate years.

Contra Account

An account used in accounting to offset or reduce the balance of a related principal account.

Prepaid Expenses

Costs paid in advance for goods or services to be received in the future, which are recorded as assets until they are consumed.

Accrued Expenses

Expenses that have been incurred but not yet paid for, often recognized in the accounting period they are incurred.