Question

Huang Inc. has a contract with its president, Ms. Shen, to pay her a bonus during each of the years 2011, 2012, and 2013. Assume a corporate income tax rate of 40% during the three years. The profit before deductions for bonus and income taxes was $250,000 in 2011, $308,000 in 2012, and $350,000 in 2013. The president's bonus of 12% is deductible for tax purposes in each year and is to be calculated as follows:
(a) In 2011, the bonus is to be based on profit before deductions for bonus and income tax.
(b) In 2012, the bonus is to be based on profit after deduction of bonus but before deduction of income tax.
(c) In 2013, the bonus is to be based on profit before deduction of bonus but after deduction of income tax.
Instructions
Calculate the amounts of the bonus and the income tax for each of the three years.


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  • CreatedAugust 23, 2015
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