Summers, Inc., pays its managers a bonus consisting of 7% of net income (income after deduction of both bonus and income taxes). The company's income tax rate is 20%. Income for the current year is $600,000.
How much bonus would be paid for the current year (rounded to whole dollars)?

Question

Quizplus · Accepted Answer

First, we need to calculate net income by subtracting the income tax from the income:
Net income = $600,000 - ($600,000 x 0.20) = $480,000

Then, we can calculate the bonus amount by taking 7% of the net income:
Bonus = $480,000 x 0.07 = $33,600

Therefore, the best choice is B.