Alex Is 37 Years Old, Single and Employee of Ellis

question 94

Multiple Choice

Alex is 37 years old, single and employee of Ellis Company.
I.If Alex is an active participant in the company's pension plan, he is allowed to make a contribution to his IRA account only if his adjusted gross income is less than $63,000.
II.If Alex is an active participant in the company's pension plan, and has adjusted gross income of $68,000, he is allowed to contribute $5,500 to his IRA account, but he is only allowed a deduction of $2,750 for the contribution because his adjusted gross income is between $63,000 - $73,000.
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• A)Only statement I is correct
• B)Only statement II is correct
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Unamortized Premium

The portion of the bond premium that has not yet been expensed to interest over the life of the bond.

Straight-Line Method

A depreciation technique which evenly spreads the cost of a fixed asset over its useful life.

Effective Interest Rate Method

A method of calculating the amortized cost of a bond and the periodic interest expense over the life of the bond.

Material Differences

Significant discrepancies or variations that can affect the decisions of users of financial statements, often necessitating adjustments or disclosures.