Question

For the year ended December 31, 2015, Lopez Company has implemented an employee bonus program equal to 3% of Lopez’s net income, which employees will share equally. Lopez’s net income (pre-bonus) is expected to be $500,000, and bonus expense is deducted in computing net income. (Round your final answer to the nearest dollar.)1. Compute the amount of the bonus payable to the employees at year-end (use the method described in the chapter and round to the nearest dollar).
2. Prepare the journal entry at December 31, 2015, to record the bonus due the employees.
3. Prepare the journal entry at January 19, 2016, to record payment of the bonus to employees.

Answer 1

Answer:

Explanation:

1. Before passing the journal entries, we have to determine the amount of bonus payable that is shown below:

Let us assume that the bonds payable at the year end be X

So, the equation is

X = 0.03 × ($500,000 - X)

X = $15,000 - 0.03X

X + 0.03 = $15,000

X = $15,000 ÷ 1.03

   = $14,563

Now the journal entries are

2. Employees bonus expense A/c Dr $14,563

               To Bonus payable A/c $14,563

(Being the bonus  due is recorded)

3. Bonus payable A/c Dr $14,563

           To Cash A/c $14,563

(Being the payment is recorded)