Compute management’s 2012 bonus

Reference no: EM131407978

The management of Sting Enterprises shares in a bonus that is determined and paid at the end of each year. The amount of the bonus is defined by multiplying net income from continuing operations (after tax) by 12 percent. The bonus is not used in the calculation of income from continuing operations. During 2012, Sting was a defendant in a lawsuit and was required to pay $480,000 over and above the amount covered by insurance. The loss is tax deductible, and the company's tax rate is 35 percent. The company was last involved in a lawsuit five years ago. Net income from continuing operations (before tax) for 2012, excluding the loss from the lawsuit, was $800,000.

a. Compute management's 2012 bonus, assuming that the lawsuit is considered unusual but not infrequent.

b. Compute management's 2012 bonus, assuming that the lawsuit is considered extraordinary.

c. Repeat (a) and (b) above, assuming that Sting was awarded the $480,000 settlement instead of having to pay it.

d. Explain how the decision to include or exclude an item as extraordinary can have significant economic consequences.

Reference no: EM131407978

Questions Cloud

Identify the ethical dilemma : 1. Identify who is affected (who is the protagonist and who are the primary stakeholders); 2. Identify the ethical dilemma (what are the ethical issues);

Determine treatment effects of the two layouts could be zero : Two different machine control-button configurations are being tested.- At the 0.05 level, determine whether the treatment effects of the two layouts could be zero.

Overall experience of the university : You work for Keiser University. Your job is to help understand the needs of the students. Your project right now is to create a series of six (6) questions that will be asked to a large group of current students. You are looking to find out how th..

Identify the null and alternative hypotheses : Identify the null and alternative hypotheses in terms of the treatment effects, then use the 0.025 level of significance in reaching a conclusion regarding the null hypothesis.

Compute management’s 2012 bonus : Compute management's 2012 bonus, assuming that the lawsuit is considered unusual but not infrequent.

Who manufactures the physical goods : Who manufactures the physical goods? Who is responsible for the quality and delivery of the physical goods?

Write an explication of one of the assigned poems : Write an explication of one of the assigned poems - For this particular essay, you will want to focus on the poetic techniques of diction, tone, image, and/or figurative language, which we will also cover in this unit.

Compute comprehensive income for 2009 : Describe how these activities are reflected on H&R Block's balance sheet, income statement, and statement of shareholders' equity

Identify the null and alternative hypotheses : Identify the null and alternative hypotheses in terms of the treatment effects, then use the 0.05 level of significance in reaching a conclusion regarding the null hypothesis.

User Account

All Pages