For the year ended December 31, 2015, Lopez Company has implemented an employee
ID: 2423742 • Letter: F
Question
For the year ended December 31, 2015, Lopez Company has implemented an employee bonus program equal to 3% of Lopez's net income, which employees will share equally. Lopez's net income (pre-bonus) is expected to be $500,000, and bonus expense is deducted in computing net income. Compute the amount of the bonus payable to the employees at year-end (use the method described in the chapter and round to the nearest dollar). Prepare the journal entry at December 31, 2015, to record the bonus due the employees. Prepare the journal entry at January 19, 2016, to record payment of the bonus to employees.Explanation / Answer
1. Computation of Bonus Payable to employee:
Pre- Bonus Income(103%) = $500,000
(-) Bonus (3%) = $14563.106 or approx. $ 14,563
Post-Bonus Income = $ 485,437
As, pre bonus Income is inclusive of Bonus. So, bonus Expense should be deducted in computing the Income.
So, Bonus Amount equals to $ 14,563.
Debit Credit
2. Jouranl Entry at December 31,2015:
Bonus Expense $14,563
Accrued Bonus Expense $14,563
3.Jouranl Entry at January 19,2016
Accrued Bonus Expense $14,563
Bank/Cash $14,563