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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Suppose that Blake Company’s total pretax difference from a change to FIFO was $100,000 and the company pays a bonus of 5% of its income before income taxes and bonus to employees. If Blake pays an additional bonus | based on the change in income, would it recognize any expense? If so, when and how much?

To determine

Explain whether Company B would recognize expense, if the company pays 5% bonus on change in income of $100,000.

Explanation

Expenses: Expenses are costs incurred for the operations of a business. The costs incurred for generating revenues are rent expense, depreciation expense, general and administrative expenses, selling expenses, and utilities expense.

Recognition of expense: If Company B pays 5% bonus on change in income of $100,000, the expense of $5,000 (

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