Question

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 30%. Required: 1. Compute the amount of Raymond Moss's bonus. Bonus

Answer 1

Answer:

$22,500

Explanation:

Raymond Moss's bonus is computed as the excess of $100,000 of income before bonus and income taxes.

In other words, the income before bonus and income taxes of $250,000 minus $100,000 is the amount upon which the bonus is computed.

Bonus=excess of income before bonus and income taxes*rate of bonus

income before bonus and income taxes.=$250,000-$100,000

income before bonus and income taxes.=$150,000

bonus rate=15%

Bonus=$150,000*15%

Bonus=$22,500