Libra Corporation’s president has a profit-sharing agreement with the company. The agreement states that the president is to receive a bonus consisting of a basic amount equivalent to 10% of the company’s net income before deduction of bonus but after deduction of income tax. In addition, the basic bonus shall be increased by the company’s tax savings on bonus because the total amount of bonus is deductible in computing the company’s taxable income. The company registered a net income of P5,000,000 before deduction of the president’s bonus and income tax. The company is subject to corporate income tax of 30%. What is the total amount of bonus due to the president? a. P522,388 c. P339,806 b. P360,825 d. P263,158
Libra Corporation’s president has a profit-sharing agreement with the company. The agreement states that the president is to receive a bonus consisting of a basic amount equivalent to 10% of the company’s net income before deduction of bonus but after deduction of income tax. In addition, the basic bonus shall be increased by the company’s tax savings on bonus because the total amount of bonus is deductible in computing the company’s taxable income. The company registered a net income of P5,000,000 before deduction of the president’s bonus and income tax. The company is subject to corporate income tax of 30%. What is the total amount of bonus due to the president? a. P522,388 c. P339,806 b. P360,825 d. P263,158
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Libra Corporation’s president has a profit-sharing agreement with the company. The agreement states that the president is to
receive a bonus consisting of a basic amount equivalent to 10% of the company’s net income before deduction of bonus but after
deduction of income tax. In addition, the basic bonus shall be increased by the company’s tax savings on bonus because the total amount of bonus is deductible in computing the company’s taxable income. The company registered a net income of P5,000,000 before deduction of the president’s bonus and income tax. The company is subject to corporate income tax of 30%. What is the total amount of bonus due to the president?
a. P522,388 c. P339,806
b. P360,825 d. P263,158
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