Derby Company pays its executives a bonus of 6 percent of income before deducting the bonus and income taxes.For the quarter ended March 31,20X8,Derby had income before the bonus and income tax of $12,000,000.For the year ended December 31,20X8,Derby estimates that its income before bonus and income taxes will be $70,000,000.For the quarter ended March 31,20X8,what is the amount of the bonus that Derby should deduct on its income statement?
A)$4,200,000
B)$720,000
C)$1,050,000
D)$180,000

Question

Quizplus · Accepted Answer

To calculate the bonus amount for the first quarter, we need to multiply the income before bonus and income taxes by the bonus rate:

$12,000,000 x 0.06 = $720,000

Therefore, the amount of the bonus that Derby should deduct on its income statement for the first quarter is $720,000.

Derby Company Pays Its Executives a Bonus of 6 Percent