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milu119
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Posted: 08 May 2009 at 11:55 \| IP Logged

After three profitable years, Dodd Co. decided to offer a bonus to its branch manager, Cone, of 25% of income over $100,000 earned by his branch. For the year 2002, income for Cone's branch was $160,000 before income taxes and Cone's bonus. Cone's bonus is computed on income in excess of $100,000 after deducting the bonus, but before deducting taxes. What is Cone's bonus for the year 2002?

a. $12,000 b. $15,000 c. $25,000 d. $32,000

Choice "a" is correct.

How did they get 12,000 answer? Please Someone explain me, because I calculated and i got the answer 15,000.

bonus is computed on income in excess of $100,000, so I claculated as 60000*25%=15000

Where am I missing something? Please help me. Thank you in advace.

KobeCPA81pts
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Posted: 08 May 2009 at 12:05 \| IP Logged

B= .25(60,000-B) >> 25% of amount in excess of 100K and after bonus
B= 15,000-.25B
1.25B=15,000
B=12,000//

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CPAwishful
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Posted: 08 May 2009 at 12:22 \| IP Logged

according to my co-worker who just solved it here is what she did:

You have to solve for x (x being the bonus unknown):

x=.25(60,000 - x)

x=15,000-.25x

1.25x=15,000

x=12,000

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globetrotter
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Posted: 08 May 2009 at 12:45 \| IP Logged

Bonus is equal to 25% of Income over $100,000 less the Bonus.

in Algebraic equation:

B = 25% (I - $100,000 - B)

where:
B = Bonus
I = Income

Solve for B:

B = 25% ($160,000 - $100,000 - B)
B = $15,000 - 0.25B
B + 0.25B = $15,000
1.25B = $15,000
B = $15,000/1.25
B = $12,000

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milu119
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Posted: 08 May 2009 at 14:33 \| IP Logged

Thank You sooooo much for replying.

Now, I understand. I knew this method but I was blank, I don't know that how I couldn't get this simple calculation. Sometime, it happens that I know about that topic but when I look at the question I can't figure it out. I hope I'll do better on the exam. Actully I am taking FAR Exam on May 26. This is my second time, first time I had 69, hope for this time.

Thank You all once again.

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