In 2012,Jindal Corporation paid compensation of $42,300 to the participants in a profit sharing plan and then contributed $12,800 to the plan.Jindal's deductible amount and any contribution carryover are as follows:
A) $0 deductible; $12,800 carryover.
B) $8,460 deductible; $4,340 carryover.
C) $10,575 deductible; $2,225 carryover.
D) $12,690 deductible; $110 carryover.
E) None of the above.

Question

Quizplus · Accepted Answer

The deductible amount for a profit-sharing plan is 25% of the compensation paid to the plan participants. Therefore, the deductible amount for Jindal Corporation is $10,575 (25% of $42,300). The contribution carryover is calculated by subtracting the deductible amount from the contribution made to the plan, which is $12,800 - $10,575 = $2,225. Hence, the best choice is C.

In 2012,Jindal Corporation Paid Compensation of $42,300 to the Participants