Question

# Principle company sponsors a Profit Sharing plan with a 15% contribution using a standard allocation formula....

Principle company sponsors a Profit Sharing plan with a 15% contribution using a standard allocation formula. Scott, the owner, makes \$200,000. Cindy, a long-term employee makes \$100,000, and Brian a new employee is making \$60,000. How much does each employee receive in their profit-sharing account?

Each employee(Cindy and Brian) receive in their profit-sharing account is calculated as follows:

Scott, the owner of Principle company makes \$200,000 and Profit Sharing plan with a 15% contribution using a standard allocation formula.

Total Profit allocable to employees   = \$200,000 *15%

= \$30,000

Total earning of employees = Earning of employee Cindy + Earning of employee Brian

= \$100,000 + \$60,000

= \$160,000

1)Cindy,an employee will receive the profit in his profit-sharing account is

= \$30,000 * (\$100,000/\$160,000)

= \$18,750

2)Brian ,an employee will receive the profit in his profit-sharing account is

= \$30,000 * (\$60,000/\$160,000)

= \$11,250

So, Cindy,an employee will receive  \$18,750 and Brian ,an employee will receive \$11,250 their profit-sharing account

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