McDeer Equipment Company manufactures farm equipment. It has fifty co-owned dealership subsidiaries. McDeer owns 75 percent of each, and the local operator has a 25 percent equity interest. McDeer sells merchandise to the dealerships at a transfer price that reflects a 35 percent gross margin on sales, and finances dealership inventories at 80 percent of the purchase price. Financing bears 10 percent interest, and must be settled within 30 days of the dealer's sale of the merchandise.
Western Nebraska Farm Supply, one of McDeer's dealer subsidiaries, acquires 80 percent of its merchandise from McDeer and 20 percent from other vendors, at markups similar to those charged by McDeer. For the year ended December 31, 2013, Western Nebraska Farm Supply presents the following income statement: '
Sales revenue$3,400,000
Cost of goods sold2,500,000
Gross margin900,000
Operating expenses750,000
Income before taxes$ 150,000
The dealership's balance sheet shows ending inventory of $680,000 and inventory financing due to McDeer of $720,000. Beginning-of-year balances were inventory of $300,000 and financing due of $380,000. Average financing indebtedness during the year was $600,000; interest expense is included in cost of goods sold.
Wendy Carr, the manager and 25 percent stockholder in Western Nebraska Farm Supply, receives a salary (included in operating expenses) and a bonus based on income. McDeer retains 40 percent for income taxes and corporate costs, and distributes 15 percent of the remainder to the local dealer as a bonus. Accordingly, Wendy expects a bonus of $13,500 (= $150,000 X 60% X 15%). However, McDeer bases the bonus on the dealership's income after adjustments to remove unconfirmed intercompany profits in the dealership inventory and interest paid to the parent company.
Required
Prepare a report computing Wendy Carr's bonus for 2013.