Compute the amount of Kimberley bonus

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Problem - Bonus Obligation and Income Tax Expense - James Kimberley, president of National Motors, receives a bonus of 10% of National's profits above $1,500,000, before the bonus and the corporation's income taxes are deducted. National's effective income tax rate is 21%. Profits before income taxes and his bonus are $5,000,000 for 2019.

Required -

1. Compute the amount of Kimberley's bonus for 2019.

2. Compute National Motors' income tax expense for 2019.

3. Prepare journal entries at the end of 2019 to record the bonus and income taxes.

4. Show how the bonus and income taxes would be reported on National Motors' December 31, 2019, balance sheet.

Reference no: EM132884192

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