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Worldatwork Exam T7 Topic 1 Question 7 Discussion

Actual exam question for Worldatwork's T7 exam
Question #: 7
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?

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Suggested Answer: B


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