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Payroll: Bonus Tonya Latirno is a staff accountant for Cannally and Kennedy, a local CPA firm. For the past 10 years, the firm has given employees a year-end bonus equal to two weeks’ salary. On November 15, the firm’s management team announced that there would be no annual bonus this year. Because of the firm’s long history of giving a year-end bonus, Tonya and her coworkers had come to expect the bonus and felt that Cannally and Kennedy had breached an implicit agreement by discontinuing the bonus. As a result, Tonya decided that she would make up for the lost bonus by working an extra six hours of overtime per week for the rest of the year. Cannally and Kennedy’s policy is to pay overtime at 150% of straight time. Tonya’s supervisor was surprised to see overtime being reported, because there are generally very little additional or unusual client service demands at the end of the calendar year. However, the overtime was not questioned, because employees are on the “honor system” in reporting their work hours. 1. Is Cannally and Kennedy acting in an ethical manner by eliminating the bonus? Explain your answer. 2. Is Tonya behaving ethically by making up the bonus with unnecessary overtime? Why?

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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 10, Problem 1TIF
Textbook Problem
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Payroll: Bonus

Tonya Latirno is a staff accountant for Cannally and Kennedy, a local CPA firm. For the past 10 years, the firm has given employees a year-end bonus equal to two weeks’ salary. On November 15, the firm’s management team announced that there would be no annual bonus this year. Because of the firm’s long history of giving a year-end bonus, Tonya and her coworkers had come to expect the bonus and felt that Cannally and Kennedy had breached an implicit agreement by discontinuing the bonus. As a result, Tonya decided that she would make up for the lost bonus by working an extra six hours of overtime per week for the rest of the year. Cannally and Kennedy’s policy is to pay overtime at 150% of straight time.

Tonya’s supervisor was surprised to see overtime being reported, because there are generally very little additional or unusual client service demands at the end of the calendar year. However, the overtime was not questioned, because employees are on the “honor system” in reporting their work hours.

  1. 1. Is Cannally and Kennedy acting in an ethical manner by eliminating the bonus? Explain your answer.
  2. 2. Is Tonya behaving ethically by making up the bonus with unnecessary overtime? Why?

(1)

To determine

Explain the ethical issues related to the elimination of the bonus

Explanation of Solution

Bonus: Bonus is an additional amount of money paid by the employer as an appreciation for the performance of the employee.

Bonus is not an obligation, it is purely, the decision of the employer whether to distribute bonus or not...

(2)

To determine

Explain the ethical issues related to the working of additional hours by TL to make up the bonus

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Financial And Managerial Accounting
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