Pratt, Inc.paid its executives a $320, 000 bonus based on profit results for the fiscal year ended December 31, 2010.Based on its master budgets for 2011, Pratt estimates its bonuses for the fiscal year ended December 31, 2011, will be $300, 000.What amount, if any, should Pratt recognize as an expense for bonuses in its quarterly income statement for the three months ended March 31, 2011?
A)$ 0
B)$ 75, 000
C)$100, 000
D)$300, 000

Question

Quizplus · Accepted Answer

Pratt should recognize $75,000 as an expense for bonuses in its quarterly income statement for the three months ended March 31, 2011, because the estimated annual bonus of $300,000 should be allocated evenly across the four quarters of the fiscal year, resulting in $300,000 / 4 = $75,000 per quarter.