Sometimes compensation packages include bonuses designed to provide performance incentives to employees. The difficulty a bonus can
Question:
Regalia Fashions has an incentive compensation plan through which a division manager receives a bonus equal to 10% of the division’s net income. Division income in 2011 before the bonus and income tax was $150,000. The tax rate is 30%.
Required:
1. Express the bonus formula as one or more algebraic equation(s). *
2. Using these formulas calculate the amount of the bonus.
3. Prepare the adjusting entry to record the bonus compensation.
4. Bonus arrangements take many forms. Suppose the bonus specifies that the bonus is 10% of the division’s income before tax, but after the bonus itself. Calculate the amount of the bonus.
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Related Book For
Intermediate Accounting
ISBN: 978-0077400163
6th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson
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