(Bonus Compensation) Alan Iverson Company has a profit-sharing agreement with its employees that provides for deposit in a pension trust for the benefit of the employees of 25% of the net income after deducting (1) federal taxes on income, (2) the amount of the annual pension contribution, and

(3) a return of 10% on the stockholders’ equity as of the end of the year 2004.

Instructions Compute the amount of the pension contribution under the assumption that the stockholders’ equity at the end of 2004 before adding the net income for the year is $700,000; that net income for the year before either the pension contribution or tax is $300,000; and that the pension contribution is deductible for tax purposes. Use 40% as the applicable rate of tax.