Question

Bonus Obligation Raymond Moss, vice president of Moss Auto Parts, gets an annual bonus of 16%...

Bonus Obligation

Raymond Moss, vice president of Moss Auto Parts, gets an annual bonus of 16% of any income, before deducting bonus and income taxes, above $100,000. Income before bonus and income taxes is $304,000. The effective income tax rate is 30%.

Required:

1. Compute the amount of Raymond Moss's bonus.

Bonus = $____________

2. Compute the income tax expense.

Income tax expense = $____________

Business   Accounting   
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Homework Answers

Answer #1
Answer:
1)
Amount of Raymond Moss's bonus
         =   Income above $ 100,000 x Percent of Annaul Bonus
         =   ( $ 304,000 (-) $ 100,000 ) x 16%
         = $ 204,000 x 16%		 $ 32,640
2)
Income tax expense
      = ( Income before bonus and income taxes (-) bonus) x tax rate
      = ( $ 304,000 (-) $ 32,640 ) x 30%
      =   $ 271,360 x 30%		 $ 81,408
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