Washington Corporation provides an incentive compensation plan under which its president is to receive a bonus equal to 10 percent of Washington's income in excess of $100,000 before deducting income tax but after deducting bonus. If income before income tax and bonus is $320,000 and the effective tax rate is 40 percent, the amount of the bonus should be

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The bonus is 10% of income in excess of $100,000. Income before bonus is $320,000, so income in excess of $100,000 is $320,000 - $100,000 = $220,000. The bonus is 10% of $220,000, which is $22,000.

Washington Corporation Provides an Incentive Compensation Plan Under Which Its