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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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Bonus Obligation Raymond Moss, vice president of Moss Auto Parts, gets an annual bonus of 15% of any income, before deducting bonus and income taxes, above $100,000. Income before bonus and income taxes is $250,000. The effective income tax rate is 21%.

Required:

  1. 1. Compute the amount of Raymond Moss’s bonus.
  2. 2. Compute the income tax expense.

1.

To determine

Calculate the bonus of Person R.

Explanation

Liabilities:

The claims creditors have over assets or resources of a company are referred to as liabilities. These are the debt obligations owed by company to creditors. Liabilities are classified on the balance sheet as current liabilities and long-term liabilities.

Calculate the bonus of Person R.

Bonus of Person R = Annual bonus  percent×(Income before the bonus and income taxesIncome before deducting the bonus and income taxes)=15%×($250,000$100,000)=$22,500

Calculate income tax expense

2.

To determine

Calculate income tax expense.

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