Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

Which of the following best describes distributions from a traditional defined contribution plan?

They are always tax-free to the recipient regardless of age.

They are generally taxable to the recipient as ordinary income upon withdrawal.

They are considered capital gains and taxed at a lower rate.

They are only taxable if the recipient is under age 59½.

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Verified step by step guidance

Understand the concept of a traditional defined contribution plan: This type of retirement plan allows employees and employers to contribute pre-tax dollars to an account that grows tax-deferred until withdrawal.

Recognize the tax implications: Contributions are made pre-tax, meaning they are not taxed at the time of contribution. However, withdrawals are generally taxed as ordinary income.

Clarify the taxation rules: Distributions from a traditional defined contribution plan are not considered capital gains, nor are they tax-free. They are taxed as ordinary income upon withdrawal, regardless of age.

Address the age-related rule: If the recipient withdraws funds before age 59½, they may face an additional 10% early withdrawal penalty, but the distribution itself is still taxed as ordinary income.

Conclude the correct description: The correct answer is that distributions are generally taxable to the recipient as ordinary income upon withdrawal, aligning with the tax treatment of traditional defined contribution plans.