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% |
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