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Persia
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Joined: 12 Feb 2009
Location: Bahrain
Online Status: Offline
Posts: 26

Posted: 08 Oct 2010 at 14:05 \| IP Logged

42. CPAAfter

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

Guys try to solve this question, the answer is "a".

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KMirgAZ
Major Contributor

Joined: 01 Apr 2009
Location: United States
Online Status: Offline
Posts: 413

Posted: 08 Oct 2010 at 14:50 \| IP Logged

160,000-100,000 = 60,000 amount available for bonus

60,000/1.25 = 48,000 amount of income in excess of 100K and after the bonus which is availble for the 25% bonus

60,000-48,000 = 12,000 Bonus

48,000*25% = 12,000

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Kevin
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BEC: 79
AUD: 72,84
REG: 88
FAR: 69,77
Ethics: 01/2010

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