Worldatwork Exam T7 Topic 3 Question 89 Discussion

Actual exam question for Worldatwork's T7 exam

Question #: 89
Topic #: 3

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 Kayleigh at Jun 01, 2024, 08:44 AM

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Ricarda

5 months ago

Haha, I bet the exam writers are laughing at us right now. 'Let's see how many ways we can confuse these poor souls!'

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Lai

5 months ago

Wait, wait, wait. What if the answer is D) 5.5% of profit? You know, because the company has to recognize both the original 3% and the reduced 2.5% due to turnover. Just throwing that out there.

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Valentin

4 months ago

B) 2.5% of profit

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Dottie

4 months ago

C) 3% of profit

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Adelina

4 months ago

A) 0.5% of profit

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Irma

5 months ago

B) 2.5% of profit

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Fletcher

5 months ago

A) 0.5% of profit

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Marta

5 months ago

You guys are overthinking this. The correct answer is clearly C) 3% of profit. The company recognizes the full profit-sharing obligation, even if it's reduced later due to turnover.

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Lenna

6 months ago

Really? I was thinking it's A) 0.5% of profit, since that's the difference between the original 3% and the reduced 2.5% due to staff turnover.

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Reyes

5 months ago

So, the correct answer is B) 2.5% of profit then.

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Georgeanna

5 months ago

I agree, the liability and expense recognized by Company ABC would be 2.5% of profit.

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Eden

5 months ago

I think it's B) 2.5% of profit, that's what the company estimates after factoring in staff turnover.

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Donte

6 months ago

Hmm, this is tricky. I think the answer is B) 2.5% of profit, since the company estimates that staff turnover will reduce the payments to that amount.

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