Jamison Enterprises estimates that it will pay a 5% bonus on annual net income after deducting the bonus.If Jamison reports net income of $480,000 before the calculation of the bonus,the amount of the bonus is $24,000.

Question

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The bonus is calculated on the net income after deducting the bonus itself. If the net income before the bonus is $480,000 and the bonus rate is 5%, the bonus is not simply 5% of $480,000. Instead, let B be the bonus amount. The equation to find the bonus is B = 5% * ($480,000 - B). Solving this equation gives a different amount than $24,000.

Jamison Enterprises Estimates That It Will Pay a 5% Bonus