Your company has a travel policy that reimburses employees for the "ordinary and necessary" costs of business travel. Employees often mix a business trip with pleasure by either extending the time at the destination or traveling from the business destination to a nearby resort or other personal destination. When this happens, an allocation must be made between the business and personal portions of the trip. However, the travel policy is unclear on the allocation method to follow. Consider this example. An employee obtained a business-class ticket for $9,552 and traveled the following itinerary. From Chicago Paris. Rio de Janeiro TO Paris Rio de Janeiro. Chicago One-Way Regular Fare $3,650 1. Business portion of the airfare 2. Business portion of the airfare Miles. 4, 220 5,630 4,140 5,250 3,450 Purpose Business Personal Return. On the date of the flights between Chicago and Paris (and return), a restricted round-trip fare of $4,820 was available. Required: a. Compute the business portion of the airfare according to each of the following independent scenarios: 1. Based on the maximum reimbursement for the employee. 2. Based on the minimum cost to the company.
Your company has a travel policy that reimburses employees for the "ordinary and necessary" costs of business travel. Employees often mix a business trip with pleasure by either extending the time at the destination or traveling from the business destination to a nearby resort or other personal destination. When this happens, an allocation must be made between the business and personal portions of the trip. However, the travel policy is unclear on the allocation method to follow. Consider this example. An employee obtained a business-class ticket for $9,552 and traveled the following itinerary. From Chicago Paris. Rio de Janeiro TO Paris Rio de Janeiro. Chicago One-Way Regular Fare $3,650 1. Business portion of the airfare 2. Business portion of the airfare Miles. 4, 220 5,630 4,140 5,250 3,450 Purpose Business Personal Return. On the date of the flights between Chicago and Paris (and return), a restricted round-trip fare of $4,820 was available. Required: a. Compute the business portion of the airfare according to each of the following independent scenarios: 1. Based on the maximum reimbursement for the employee. 2. Based on the minimum cost to the company.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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