Compute the amount in the bonus pool

Assignment Help Finance Basics

Reference no: EM131408215

Jordan Brothers recently instituted a bonus plan to pay its executives. The plan specifies that net income must exceed $200,000 before any bonus payments are made. Cash in the amount of 10 percent of net income in excess of $200,000 is placed in a bonus pool, which is to be shared evenly by each of the executives. Ignore income taxes, and assume that the bonus payment is not included as an expense in the calculation of net income.

a. Briefly describe why a company would institute a bonus plan, and compute the amount in the bonus pool if Jordan Brothers shows net income of $300,000. Prepare the journal entry that would be recorded to reflect the bonus liability at the end of the year.

b. How much is in the bonus pool if Jordan Brothers shows net income of $180,000? Assume that Jordan Brothers is being sued for $60,000 as of the end of the year. The company's legal counsel believes that there is an 80 percent chance that Jordan will lose the suit and that the entire $60,000 will have to be paid. Assume also that the suit was ignored when the $180,000 net income was computed. Why might Jordan's management wish to accrue the loss from the suit in the current year instead of simply disclosing it?

Reference no: EM131408215

Questions Cloud

How should zeus power account for this situation : How should Regional Supply account for the situation? Briefly describe some of the factors that might affect how Regional Supply chooses to account for this situation.

Determine the confidence interval for the population mean : Using the 0.025 level of significance in testing for the main and interactive effects, what conclusions should be drawn from this experiment? Determine the 95% confidence interval for the population mean for each factor level.

Explain the US economic espionage act : Describe what provisions you would include to enhance the U.S. Economic Espionage Act of 1996. Target word count minimum is 500 words

Validity of your forecasting model : In this problem, you are to test the validity of your forecasting model. Here are the actual demands that occurred and the forecasts for a model you have been using:

Compute the amount in the bonus pool : Briefly describe why a company would institute a bonus plan, and compute the amount in the bonus pool if Jordan Brothers shows net income of $300,000. Prepare the journal entry that would be recorded to reflect the bonus liability at the end of th..

Who contributed the most to empiricism : How did clocks influence the world when they were introduced?Why was Descartes so important to the development of psychology? What did he contribute?In your opinion, who contributed the most to empiricism? Why?Which method of brain mapping do you bel..

What parts of the value chain has the focal organization : What parts of the value chain has the focal organization outsourced? Do you consider the functions outsourced by the focal organization are consistent with your value chain analysis and the analysis of resources, capabilities and core competencies

Compute the total net income for 2011 and 2012 : Assume that Seagul chose not to treat the warranty costs as contingent losses. Instead, it chose to expense warranty costs as they were paid. Compute the total net income for 2011 and 2012 for each of the two accounting treatments.

Interpret the accompanying computer output for given study : Interpret the accompanying computer output for this study, including your conclusion (use the 0.05 level) for each null hypothesis associated with the experiment.

User Account

All Pages