When an Employer Promises to Set Aside a Certain Amount

question 65

Multiple Choice

When an employer promises to set aside a certain amount of money for each employee each year, it has set up a

• A) Defined-benefit plan.
• B) Money-purchase plan.
• C) Profit-sharing plan.
• D) Salary-reduction plan.
• E) Stock bonus plan.

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Definitions:

Depreciable Cost

The total cost of an asset that is subject to depreciation, which includes the purchase price minus any salvage value.

Useful Life

The estimated period of time over which a fixed asset is expected to be usable by the business, influencing depreciation calculations.

Depreciation Expense

The allocated cost of using a fixed asset over its useful life, reflecting its decrease in value over time.

Straight-line Method

A method for calculating depreciation of an asset, which assumes the asset will lose an equal amount of value each year over its useful life.