Worldatwork Exam T7 Topic 1 Question 107 Discussion

Actual exam question for Worldatwork's T7 exam

Question #: 107
Topic #: 1

[All T7 Questions]

The profit-sharing plan of Company ABC requires the company pay a specified proportion of its profit for the year to employees who serve throughout the year. If no employees leave during the year, the total profit-sharing payments for the year will be 3% of profit. The company estimates that staff turnover will reduce the payments to 2.5% of profit. What does Company ABC recognize as a liability and an expense?

A0.5% of profit

B2.5% of profit

C3% of profit

D5.5% of profit

Show Suggested Answer

Suggested Answer: B

by Felice at Feb 07, 2025, 12:01 PM

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Lavina

5 months ago

This is a tricky one, but I think the correct answer is B) 2.5% of profit. The question states the company 'recognizes' this as the liability and expense, not that it necessarily pays out that amount.

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Dean

4 months ago

So the company plans for 2.5% but may end up paying out less if employees leave during the year.

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Chanel

4 months ago

That makes sense, it's based on the estimated staff turnover affecting the profit-sharing payments.

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Launa

5 months ago

I agree, the company recognizes 2.5% of profit as a liability and expense.

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Leana

5 months ago

Ha! The answer is clearly D) 5.5% of profit. I mean, come on, it's a profit-sharing plan - the more the merrier, right? Who cares about staff turnover, just pay them all the money!

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Floyd

5 months ago

I'm not sure about this one. If the company pays 3% of profit when there's no staff turnover, and 2.5% when there is, wouldn't the correct answer be A) 0.5% of profit? That's the difference, right?

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Aleta

4 months ago

No, the liability and expense recognized would be the difference between 3% and 2.5%, which is 0.5%.

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Azalee

4 months ago

B) 2.5% of profit

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Rory

5 months ago

That makes sense, the difference between 3% and 2.5% is 0.5%.

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Lettie

5 months ago

A) 0.5% of profit

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Dottie

6 months ago

I agree with Linette, B) 2.5% of profit is the way to go. This is a straightforward profit-sharing plan calculation.

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Sunny

5 months ago

Yes, I agree. It's based on the estimated staff turnover reducing the total profit-sharing payments.

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Evette

5 months ago

I think B) 2.5% of profit is the correct answer.

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Ressie

6 months ago

I'm not sure, but it makes sense that the liability and expense would be based on the estimated profit-sharing payments of 2.5%.

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Joanna

6 months ago

I agree with Augustine. The company estimates that staff turnover will reduce the payments to 2.5% of profit.

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Linette

6 months ago

Hmm, I think the correct answer is B) 2.5% of profit. The question clearly states that staff turnover will reduce the payments to 2.5% of profit, so that's what the company should recognize as a liability and an expense.

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