Question

In: Accounting

Garfield Company pays its general manager an annual bonus. For the year 2020, the company reported...

Garfield Company pays its general manager an annual bonus. For the year 2020, the company reported profit of P 8,000,000 before deductions for bonus and corporate income taxes. The corporate income tax is 30%.

REQUIRED: Determine the amount of bonus under each of the following assumptions:

a.) Bonus is 8% of profit before deductions for both bonus and income taxes.

b.) Bonus is 8% of profit after deduction for bonus but before deduction for income taxes.

c.) Bonus is 8% of profit before deduction for bonus but after deduction for income taxes.

d.) Bonus is 8% of profit after deduction for both bonus and income taxes.

Solutions

Expert Solution

Reported profit in P    8,000,000
Bonus % 8%
Tax % 30%
Bonus amount in P Explanation
Case a       640,000 Reported profit* Bonus%
Case b       588,800 Reported profit* (1-Bonus%)* Bonus%
Case c       448,000 Reported profit* (1-Tax%)* Bonus%
Case d       396,800 Reported profit* (1-Tax%-Bonus%)* Bonus%

ekkarill92 answered 2 years ago
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