Roscoe Company has a contract with its CEO to pay him a bonus during each of the years 2018 – 2021. The profit before deductions for bonus and income taxes were P12,500,000 in 2018; P18,000,000 in 2019; P21,700,000 in 2020; and P24,000,000 in 2021. The bonus of 20% is deductible for tax purposes in each year. The tax rate is 25%.
Roscoe Company has a contract with its CEO to pay him a bonus during each of the years 2018 – 2021. The profit before deductions for bonus and income taxes were P12,500,000 in 2018; P18,000,000 in 2019; P21,700,000 in 2020; and P24,000,000 in 2021. The bonus of 20% is deductible for tax purposes in each year. The tax rate is 25%.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter9: Current Liabilities And Contingent Obligations
Section: Chapter Questions
Problem 10P: Bonus Obligation and Income Tax Expense James Kimberley, president of National Motors, receives a...
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Roscoe Company has a contract with its CEO to pay him a bonus during each of the years 2018 – 2021.
The profit before deductions for bonus and income taxes were P12,500,000 in 2018; P18,000,000 in 2019; P21,700,000 in 2020; and P24,000,000 in 2021.
The bonus of 20% is deductible for tax purposes in each year. The tax rate is 25%.
• The 2018 bonus is based on profit before bonus and taxes
• The 2019 bonus is based on profit after bonus but before taxes
• The 2020 bonus is based on profit before bonus but after taxes
• The 2021 bonus is based on profit after bonus and taxes
Compute the amount of the bonus for each year.
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