Question

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10) Generous Company pays bonuses to its chief operating officer (COO) and sales manager. According to the incentive agreement, the COO gets 10% and the sales manager gets 8%. The basis for computing bonuses would be the net income after tax and bonuses. Income tax rate is 35%. The net income before tax and bonuses is P5,000,000 for the year 2019. How much is the bonus for the sales manager? A. 274,262 B. 223,724 C. 294,450 D. 232,766

Answer 1

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Option D $$232,766 is the correct answer.

A B С D E F G H 1 J K L M 1 2 3 4 coo bonus Sales manager Income tax 10% 8% 35% Let us asssume Income after tax and bonus is 100X Then coo bonus 10% of 100X i.e., 10X Sales manager bonus 8% of 100X i.e., 8X Income tax would be 35*100%/65X = 53.84615X Income before tax would be income after tax + tax = 100x + 53.84615X = 153.84615X Income before tax and bonus is Income before tax but after bonus + bonus = 153.84615X + 10X + 8X = 171.84615X 5 6 Income 5000000 7 8 9 10 11 Income before tax and bonus coo bonus Sales manager bonus Income before tax but after bonus Income tax Income after bonus and tax 171.84615 X 10 X 8 X 153.84615 X 53.84615 X 100 X 12 13 14 15 16 Income before tax and bonus 171.84615 X = 5000000 17 18 X = 5000000/171.84615 29095.79 19 X = 20 21 22 23 Checking answer. Income before tax and bonus coo bonus Sales manager bonus Income before tax but after bonus Income tax Income after bonus and tax 5000000 which is equal to amount given in question, so answer is correct. 290958 232766 ) 4476276 1566697 2909579 24 25 26 27 KI Sheet163 Sheet164 Sheet165 Sheet166 Sheet167 Sheet168 Sheet169 Stats Ready FRA

For calculation ref:

А. B с D E F G H J 1 2 3 COO bonus 0.1 Sales manager 0.08 Income tax 0.35 4 Let us asssume Income after tax and bonus is 100X Then coo bonus 10% of 100X i.e., 10X Sales manager bonus 8% of 100X i.e., 8X Income tax would be 35*100%/65X = 53.84615X Income before tax would be income after tax +tax = 100x + 53.84615X = 153.84615X Income before tax and bonus is Income before tax but after bonus + bonus = 153.84615X + 10X + 8X = 171.84615X 5 Income 5000000 6 7 8 9 10 11 12 Income before tax and bonus =F10+F11+F12 х coo bonus 10 х Sales manager bonus 8 х Income before tax but after bonus =SUM(F13:F14) х Income tax =F14*04/(100%-C4) X Income after bonus and tax 100 х 13 14 15 16 Income before tax and bonus =F9 X = 5000000 17 18 X = 5000000/171.84615 =5000000/171.84615 19 20 21 which is equal to amount given in question, so answer is correct. 22 X = Checking answer. Income before tax and bonus =F22+F23+F24 coo bonus =10%*F26 Sales manager bonus =8% F26 Income before tax but after bonus =SUM(F25:F26) Income tax =F26*C4/(100%-C4) Income after bonus and tax =G19*F14 23 24 25 26 27 Sheet163 Sheet164 Sheet165 Sheet166 Sheet166 Sheet167 Sheet167 Sheet168 Sheet169 Stats Ready