John Jingleheimer plans on retiring when he is 55. Right now, the entity he works for, Jacob Schmidt & Sons, will pay him 25 percent of his final estimated salary every year. His estimated final salary is $600,000 and he currently 27. John's pension plan affects Jacob Schmidt & Son's net income before he retires.

Question

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John's pension plan affects Jacob Schmidt & Sons' net income before he retires because the company must recognize pension expense related to the future pension payments during the years John is employed. This includes accruing the liability and expense associated with the future pension payments, which impacts the company's financial statements and net income prior to his retirement.

John Jingleheimer Plans on Retiring When He Is 55