Question

Jorgensen High Tech Inc. is a calendar-year, accrual-method taxpayer. At the end of year 1, Jorgensen accrued and deducted the following bonuses for certain employees for financial accounting purposes.

$45,200 for Ken.

$33,900 for Jayne.

$22,600 for Jill.

$11,300 for Justin.

How much of the accrued bonuses can Jorgensen deduct in year 1 under the following alternative scenarios? (Leave no answer blank. Enter zero if applicable.

A)Jorgensen paid the bonuses to the employees on March 1 of year 2.

Deductible Accrued Bonuses____

B) Jorgensen paid the bonuses to the employees on April 1 of year 2.

Deductible Accrued Bonuses____

c) Jorgensen paid the bonuses to employees on March 1 of year 2, and there is a requirement that the employee remain employed with Jorgensen on the payment date to receive the bonus.

Deductible Accrued Bonuses____

D) Jorgensen paid the bonuses to employees on March 1 of year 2, and there is a requirement that the employee remain employed with Jorgensen on the payment date to receive the bonus; if not, the forfeited bonus is reallocated to the other employees.

Deductible Accrued Bonuses____

Answer 1

A)	Deductible Accrued Bonuses is $ 113,000
	Paid the bonuses to the employees on March 1 of year 2
	Calculation of deductible amount on bonuses
	Employees Name	Deductible in Year 1	Deductible in Year 2
	Ken	45200
	Jayne	33900
	Jill	22600
	Justin	11300
	Total deductible	113000
	Bonuses were paid in 2 months
B)	Deductible Accrued Bonuses is $ 113,000
	Paid the bonuses to the employees on April 1 of year 2
	Calculation of deductible amount on bonuses
	Employees Name	Deductible in Year 1	Deductible in Year 2
	Ken		45200
	Jayne		33900
	Jill		22600
	Justin		11300
	Total deductible		113000
	Jorgenson cannot deduct in Year 1, because bonuses were not paid within 2.5 months. Deductible in Year 2
C)	Deductible Accrued Bonuses is $ 113,000
	Paid the bonuses to the employees on March 1 of year 2 but the employees remained unemployed on the payment date to receive the bonus:
	Calculation of deductible amount on bonuses
	Employees Name	Deductible in Year 1	Deductible in Year 2
	Ken		45200
	Jayne		33900
	Jill		22600
	Justin		11300
	Total deductible		113000
	Jorgenson cannot deduct in Year 1, because employees are eligible only when employed. Deductible in Year 2
D)	Deductible Accrued Bonuses is $ 113,000
	Deductible in Year 1. The amount of bonus paid by Jorgenson is considered to be fixed even if any employee leaves before payment date.