Question

For the year ended December 31, 2013, Mason Company has implemented an employee bonus program equal to 7% of Mason's net income, which employees will share equally. Mason's net income (pre-bonus) is expected to be $3,500,000, and bonus expense is deducted in computing net income. What is the amount that needs to be recorded for estimated bonus liability for 2013?asac

Answer 1

Answer:

Bonus liability = 7% x $3,500,000

Bonus liability = $245,000

Explanation:

Since the pre-bonus net income is $3,500,000  and the bonus is 7% of the pre-bonus net income, then, the estimated bonus liability is 7% x $3,500,000 = $245,000.