Question: stintits Co. has an incentive compensation plan through which a division manager receives a bonus equal to 10% of the divisions net income. Division income

  1. stintits Co. has an incentive compensation plan through which a division manager receives a bonus equal to 10% of the divisions net income. Division income in 2019 before the bonus and income tax was $150,000. The tax rate is 21%.

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 divisions income before tax, but after the bonus itself. Calculate the amount of the bonus.

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