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 $9,694 and traveled the following itinerary.   From To Miles One-Way Regular Fare   Purpose Chicago Paris 4,110 $ 3,580   Business Paris Rio de Janeiro 5,700   4,500   Personal Rio de Janeiro Chicago 5,250   3,310   Return     On the date of the flights between Chicago and Paris (and return), a restricted round-trip fare of $4,980 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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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 $9,694 and traveled the following itinerary.
 

From To Miles One-Way Regular Fare   Purpose
Chicago Paris 4,110 $ 3,580   Business
Paris Rio de Janeiro 5,700   4,500   Personal
Rio de Janeiro Chicago 5,250   3,310   Return
 

 

On the date of the flights between Chicago and Paris (and return), a restricted round-trip fare of $4,980 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.

One-Way
Regular
From
To
Miles
Fare
Purpose
Business
$ 3,580
Chicago
Paris
Paris
Rio de Janeiro
Chicago
4,110
5,700
5,250
Personal
Rio de Janeiro
4,500
3,310
Return
Transcribed Image Text:One-Way Regular From To Miles Fare Purpose Business $ 3,580 Chicago Paris Paris Rio de Janeiro Chicago 4,110 5,700 5,250 Personal Rio de Janeiro 4,500 3,310 Return
1. Business portion of the airfare
2. Business portion of the airfare
Transcribed Image Text:1. Business portion of the airfare 2. Business portion of the airfare
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