Question

Assume the following information:Income before bonus and tax is $100,000.Income tax rate is 30%.Bonus rate is 10%.Compute the bonus and prepare the net income calculations for the following situations:

1. Bonus based on income before tax and before bonus.

2. Bonus based on income before tax and after bonus.

3. Bonus based on income after tax and before bonus.

4. Bonus based on income after tax and after bonus.

Answer 1

Answer 4 Bonus based on income after tax and after bonus Income before tax and bonus- $100,000 Income tax rate= 30% Bonus rate= 10% Income after Bonus $100,000-B Income tax rate= 30% Income after bonus* Income tax= tax rate Income tax= ($100,000-B)*30/100 (100,000-B)*.30 30000 - .30B Income after tax and Bonus = bonus* Bonus rate (100,000-B-(30000 - 30B)10/100 B= (100,000-B-30,000+.30B). 10 (70000-0.70B). 10 B= 7000 - 0.07B B+0.07B= 7,000 B= 7000/1.07 6542.00 B= Calculation of net income Income before tax and bonus Bonus Income after bonus Income tax@30% Net Income $100,000 6542.00 93458 28037.40 65420.60

Answer 1 Bonus based on income before tax and before bonus Income before tax and bonus= $100,000 Bonus rate= 10% Income before tax and Bonus = bonus* Bonus rate 100,000*10/100 $10,000 Calculation of net income Income before tax and bonus $100,000 Bonus 10.000 Income after bonus 90,000 Income tax@30% 27000 Net income 63.000

Answer 2 Bonus based on income before tax and after bonus Income before tax and bonus= $100,000 Let B=Bonus Bonus rate= 10% Bonus = B= B= Income before tax and after bonus* Bonus rate ($100,000 - B)*10/100 $10,000 - 10B 10,000 10,000 9090.91 9091(rounded off) B+.10 B= 1.10B= Calculation of net income Income before tax and bonus $100,000 Bonus 9091 90909 Income after bonus Income tax@30% 27273 63636 Net income

Answer 3 Bonus based on Income after tax and before bonus Income before tax and bonus= $100,000 Let B=Bonus Income after Bonus= $100,000-B Income tax rate= 30% Income after bonus* Income tax= tax rate Income tax= ($100,000-B)*30/100 (100,000-B)*.30 30000 - 30B Income after tax and before bonus- $100,000-(30,000-30B) 100,000-30,000+.30B 70,000 + .30B Income after tax and before bonus* Bonus Bonus: rate B= (70,000+.30B)10/100 B= 7,000 + .03 B B-03B= .97B= 7000 B= 7000/0.97 7,216 7000 Calculation of net income Income before tax and bonus Bonus Income after bonus Income tax@30% Net Income 100,000 7,216 92,784 27,835 64,949