For the year ended December 31,2013,Mason Company has implemented an employee bonus program equal to 7% of Mason's net income,which employees will share equally.Mason's net income (pre-bonus) is expected to be $3,500,000,and bonus expense is deducted in computing net income.What is the amount that needs to be recorded for estimated bonus liability for 2013?
A)$245,000
B)$144,118
C)$228,972
D)$50,000
E)$125,000

Question

Quizplus · Accepted Answer

The bonus is 7% of the net income after deducting the bonus itself. Let B be the bonus. Then, B = 0.07 * (3,500,000 - B). Solving for B gives B = $228,972.

For the Year Ended December 31,2013,Mason Company Has Implemented an Employee