Inter Acct Chapter_17_day_one_solutions

Inter Acct Chapter_17_day_one_solutions - Chapter 17 Day...

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Chapter 17 Day one: Question 17-1 Pension plans are arrangements designed to provide income to individuals during their retirement years. Funds are set aside during an employee’s working years so that the accumulated funds plus earnings from investing those funds are available to replace wages at retirement. An individual has a pension fund when she or he periodically invests in stocks, bonds, CDs, or other securities for the purpose of saving for retirement. When an employer establishes a pension plan, the employer provides some or all of the periodic contributions to the retirement fund. The motivation for corporations to establish pension plans comes from several sources. Pension plans provide employees with a degree of retirement security. They may fulfill a moral obligation many employers feel toward employees. Pension plans often enhance productivity, reduce turnover, satisfy union demands, and allow employers to compete in the labor market. Question 17-2 A qualified pension plan gains important tax advantages. The employer is permitted an immediate tax deduction for amounts paid into the pension fund. Conversely, the benefits to employees are not taxed until retirement benefits are received. Also, earnings on the funds set aside by the employer accumulate tax-free. For a pension plan to be qualified for special tax
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This note was uploaded on 04/05/2010 for the course ACCY 260 taught by Professor Yu during the Spring '10 term at Ferrum.

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Inter Acct Chapter_17_day_one_solutions - Chapter 17 Day...

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