Question

Jorgensen High Tech Inc. is a calendar-year, accrual-method taxpayer. At the end of year 1, Jorgensen accrued and deducted the following bonuses for certain employees for financial accounting purposes. • $60,800 for ken. • $45,600 for Jayne • $30,400 for Jill. • $15,200 for Justin How much of the accrued bonuses can Jorgensen deduct in year 1 under the following alternative scenarios? (Leave no er blant Entrari alleable

Answer 1

Ans: A). Paid the bonuses to employees on march 1

Employees name	Deductible in year 1	Deductible in year 2
Mr. ken	60800
Mr.Jayne	45600
Mr. Jill	30400
Mr. Justin	15200
Total deductible	152000

Thus Jorgensen may deduct 152000 in year 1 because the bonuses were paid in two months

B). Paid the bonuses to employees on April 1 of year 2

Employees name	Deductible in year 1	Deductible in year 2
Mr. ken		60800
Mr.Jayne		45600
Mr. Jill		30400
Mr. Justin		15200
Total deductible		152000

Hence Jorgensen may not deduct any amount in year 1 because the bonuses were not paid in 2 half 1/2 months of year end.

C) Total Bonus = $60800 + $45600 + $30400 + $15200 = $152000

As the forfeited bonus is reallocated to the other employees and bonuses were paid within 2 ½ months of year end. Minimum bonus amount can be deducted in Year 1

$152000

D)

As the forfeited bonus is reallocated to the other employees and bonuses were paid within 2 ½ months of year end. Minimum bonus amount can be deducted in Year 1

$152000