Derby Company pays its executives a bonus of 6 percent of income before deducting the bonus and income taxes.For the quarter ended March 31,2008,Derby had income before the bonus and income tax of $12,000,000.For the year ended December 31,2008,Derby estimates that its income before bonus and income taxes will be $70,000,000.For the quarter ended March 31,2008,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 for the quarter ended March 31, 2008, we need to multiply the income before deducting the bonus and income taxes by the bonus rate of 6%:

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

Therefore, the amount of the bonus that Derby should deduct on its income statement for the quarter ended March 31, 2008, is $720,000.

Derby Company Pays Its Executives a Bonus of 6 Percent