Powell is the managing partner of Power Partnership. He is given an incentive of 5% bonus on profit. The profit of the partnership id P400,000 and income tax rate is 30%. Instruction: Determine the amount of bonus under each of the following assumptions: 1. Bonus is computed based on profit before deduction for bonus and income tax. 2. Bonus is computed based on profit after deduction for bonus but before deduction for income tax. 3. Bonus is computed based on profit before deduction for bonus but after deduction for income tax. 4. Bonus is computed based on profit after deduction for both bonus and income tax.

Powell is the managing partner of Power Partnership. He is given an incentive of 5% bonus on profit. The profit of the partnership id P400,000 and income tax rate is 30%. Instruction: Determine the amount of bonus under each of the following assumptions: 1. Bonus is computed based on profit before deduction for bonus and income tax. 2. Bonus is computed based on profit after deduction for bonus but before deduction for income tax. 3. Bonus is computed based on profit before deduction for bonus but after deduction for income tax. 4. Bonus is computed based on profit after deduction for both bonus and income tax.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Exercise 3-7 (Calculation of Bonus)
Powell is the managing partner of Power Partnership. He is given an incentive of 5% bonus on
profit. The profit of the partnership id P400,000 and income tax rate is 30%.
Instruction: Determine the amount of bonus under each of the following assumptions:
1. Bonus is computed based on profit before deduction for bonus and income tax.
2. Bonus is computed based on profit after deduction for bonus but before deduction for
income tax.
3. Bonus is computed based on profit before deduction for bonus but after deduction for
income tax.
4. Bonus is computed based on profit after deduction for both bonus and income tax.
Note:
You may modify your answer sheet to fit your solution.
Follow the Instructions strictly. Answer what Is asked only.

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