Fisher Company pays its executives a bonus of 4 percent of income before deducting the bonus and income taxes.For the quarter ended March 31,20X1,Fisher had income before the bonus and income tax of $10,000,000.For the year ended December 31,20X1,Fisher estimates that its income before bonus and income taxes will be $50,000,000.For the quarter ended March 31,20X1,what is the amount of the bonus that Fisher should deduct on its income statement?
A)$100,000
B)$400,000
C)$500,000
D)$2,000,000

Question

Quizplus · Accepted Answer

To calculate the bonus, multiply the income before bonus and income tax by 4%:

$10,000,000 x 0.04 = $400,000

Therefore, the amount of the bonus that Fisher should deduct on its income statement for the quarter ended March 31, 20X1 is $400,000 (Option B).

Fisher Company Pays Its Executives a Bonus of 4 Percent