Fred Carpenter together with his brother Charlie and 3 investors created the Custom Dog Walker Company known as CDW. Located in New York City the CDW Company hires part time employees to walk dogs for customers who are typically at work and too busy to walk their own dogs during the day. CDW has over 3,000 dog walkers (part time employees), 40 managers, a President (Fred) and a Vice President (his brother Charlie), some other minimal staff, and you, the Accountant. The 5-member Board of Directors consists of two of the managers, the President (Fred), the Vice President (Charlie), and the Company lawyer (external). CDW is closely held and not Publically traded. Fred earns a salary of $1 million yearly. His brother Charlie earns $800,000 annually.

CDW has over $9 million in revenues and $4 million in profits before considering the bonus. This is the first year CDW has a bonus plan exclusively for the President. The President has come to you with calculations indicating the president is entitled to a $3.6 million bonus (90% of the pre-bonus profit). You do not have access to the document establishing the bonus.

Fred Carpenter has instructed you to account for the bonus in CDW's accounting records as: $100,000 bonus, $1.5 million professional fees expense, and $2 million in advertising and promotion expense. The entire $3.6 million bonus will be reported to the IRS as part of Fred's compensation as required by the IRS.

Fred is quite honest and frank with you. He does not want the managers or his brother Charlie to be aware of the amount and size of his bonus. He has allocated the bonus amount to the various various accounts based on his perception of how spends his time as president.

Required: Answer all parts - treat each item independently of the other parts.

1. Do employees (especially Fred's brother Charlie) have the right to know the amount of the President's compensation including the bonus amount?
2. Does the Board of directors have the right to know the amount of the Bonus?
3. What are your obligations as the Accountant?
4. Supposing you are one of the managers on the Board of Directors and you learn of the Bonus details at a regular Board Meeting. Do you have the right to share that information with other managers?

Answer rating: 100% (QA)

1According to me yes employees have the right to know the amount of the presidents compensatio... View the full answer