Which of the following is not a permissible method of calculating a bonus to an

Question

Which of the following is not a permissible method of calculating a bonus to an employee?

            a.   The bonus is based on income before deductions for the bonus and income taxes.

b.   The bonus is based on income after deduction of the bonus but before deduction of income taxes.

            c.   The bonus is based on income after deductions for the bonus and income taxes.

            d.   All of these are permissible.

The total payroll of Waters Company for the month of October, 2004 was $480,000, of which $120,000 represented amounts paid in excess of $84,900 to certain employees. $400,000 represented amounts paid to employees in excess of the $7,000 maximum subject to unemployment taxes. $120,000 of federal income taxes and $12,000 of union dues were withheld. The state unemployment tax is 1%, the federal unemployment tax is .8%, and the current F.I.C.A. tax is 7.65% on an employee

Explanation / Answer

1).D All of these are permissible.

2).    C. ($360,000

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