Question

Jorgensen High Tech Inc. is a calendar-year, accrual-method taxpayer. At the end of year 1, Jorgensen accrued and deducted the following bonuses for certain employees for financial accounting purposes:
$40,000 for Ken.
30,000 for Jayne.
20,000 for Jill.
10,000 for Justin.
How much of the accrued bonuses can Jorgensen deduct in year 1 under the following alternative scenario:
Jorgensen paid the bonuses to employees on March 1 of year 2, and there is a requirement that the employee remain employed with Jorgensen on the payment date to receive the bonus.

Answer 1

Answer:

$100,000

Explanation:

Based on the information given Jorgensen may lessen the amount of $100,000 in the second year which is year 2 reason been that the amount are NOT FIXED amount at the end of the year 1 because the employees are qualified to receive the bonus amount only in a situation where the employees are been employed on the date the bonuses amount were been paid.

Employees Deductible Year 1 Deductible Year 2

Ken $0 $40,000

Jayne $0 $30,000

Jill $0 $20,000

Justin $0 $10,000

Total $100,000