Mohammad Ameri is a vice president of the United Fruit Companys Guatemalan operations in Latin America, a
Question:
Mohammad Ameri is a vice president of the United Fruit Company’s Guatemalan operations in Latin America, a multinational company, based in Spain in Europe. Please note that in Guatemala the Guatemalan currency has the initial - GTQand Spain is a member of the European Union and its currency is the Euro. Mr. Mohammad Ameri, as vice president of the company, earns a fixed annual salary and a 10% annual bonus based on the pre-tax income of the company’s Guatemalan operations.
A condensed income statement for 2019 of the United Fruit Company’s Guatemalan subsidiary is as follows:
United Fruit Company Condensed Income Statement For the year ended 2019 | ||||
GTQ (000) | ||||
Sales | 1,260,000 | |||
Cost of goods sold | 840,000 | |||
Gross profit | 420,000 | |||
Selling expenses | 84,000 | |||
Administrative expenses | 147,000 | |||
Total expenses | 231,000 | |||
Pre-tax income | 189,000 | |||
Required:
a. If the exchange rate for Euro = GTQ 10.50 / Euro convert the income statement to Euro.
b. If Mohammad Ameri’s contract discloses that his annual bonus is 10% of the pre-tax annual income of the subsidiary in Guatemala after conversion to Euro, determine Mr. Ameri’s bonus for 2019.
c. If the Guatemalan subsidiary sales were GTQ 250,000 for 2019, with all other amounts remaining equal what would be the amount of Mr. Ameri’s 10% bonus for 2019?