Question 2 does not mention if the bonus is to be calculated on the income after tax or before tax, therefore we would do calculations for both the cases |
a) Calculation of Bonus on Income before tax |
= (Income) x % of Bonus |
= 225,000 x 6% |
$ 13,500.00 |
a) Calculation of Bonus on Income after tax |
= (Income - Tax) x % of Bonus |
= [225,000 - (225,000*30%)] x 6% |
$ 9,450.00 |
Question 3 Adjustment Entry for Bonus Compensation |
Bonus Expense account Dr. 13,500 |
To Employee Bonus Payable account Cr. 13,500 |
Question 4, Calculation of Bonus on net income before tax but after the bonus itself |
Bonus = (Income - Bonus) x % of Bonus |
Assume B is the amount of Bonus |
B =(225,000 - B) x 0.06 |
B =(225000)*0.06 - B*0.06 |
B = 13,500 - 0.06B |
1.06B = 13,500 |
B = 13,500/1.06 |
B = 12,735.85 |
Problem 13-5 Bonus compensation; algebra (LO13-3] Sometimes compensation packages include bonuses designed to provide performance incentives...
Sometimes compensation packages include bonuses designed to provide performance incentives to employees. The difficulty a bonus can cause accountants is not an accounting problem, but a math problem. The complication is that the bonus formula sometimes specifies that the calculation of the bonus is based in part on the bonus itself. This occurs anytime the bonus is a percentage of income because expenses are components of income, and the bonus is an expense. Regalia Fashions has an incentive compensation plan...
Problem 13-5 Bonus compensation; algebra [L013-3 Sometimes compensation packages include bonuses designed to provide performance incentives to employees. The difficulty a bonus can cause accountants is not an accounting problem, but a math problem. The complication is that the bonus formula sometimes specifies that the calculation of the bonus is based in part on the bonus itself. This occurs anytime the bonus is a percentage of income because expenses are components of income, and the bonus is an expense. Regalia...
Check my work Sometimes compensation packages include bonuses designed to provide performance incentives to employees. The difficulty a bonus can cause accountants is not an accounting problem, but a math problem. The complication is that the bonus formula sometimes specifies that the calculation of the bonus is based in part on the bonus itself. This occurs anytime the bonus is a percentage of income because expenses are components of income, and the bonus is an expense. Regalia Fashions has an...
Sometimes compensation packages include bonuses designed to provide performance incentives to employees. The difficulty a bonus can cause accountants is not an accounting problem, but a math problem. The complication is that the bonus formula sometimes specifies that the calculation of the bonus is based in part on the bonus itself. This occurs anytime the bonus is a percentage of income because expenses are components of income, and the bonus is an expense. Regalia Fashions has an incentive compensation plan...
Sometimes compensation packages include bonuses designed to provide performance incentives to employees. The difficulty a bonus can cause accountants is not an accounting problem, but a math problem. The complication is that the bonus formula sometimes specifies that the calculation of the bonus is based in part on the bonus itself. This occurs anytime the bonus is a percentage of income because expenses are components of income, and the bonus is an expense. Regalia Fashions has an incentive compensation plan...