Acme supply Co has an incentive compensation plan and a tiered bonus structure Area Managers receive a targeted bonus equal to 20 of their salaries if their area achieves their target sales target This bonus is tiered from 80 120 of the targeted sales goal This means that the Area manager will receive between 16 24 of their salary depending on the sales achieved For example, if they make 90 of the sales goal, they will earn 18 of their salary as a bonus (calculated by taking 90 of the 20 ) No bonus is earned if less than 80 of their sales target is achieved and the bonus will be capped at 24 of their salary Bonuses are paid annually in February of the year following the fiscal year ending December 31 Acme Compensates the local store managers with 8 commission on sales in addition to their hourly rates Commissions are paid quarterly on the 15th of the month following the commission period The following data is relevant the Northwest Area's performance during 2021 The Northwest area had a $2,600,000 sales target for 2021 The Area Manager for the Northwest Area earned a base salary of $125,000 per year Acme's Northwest area achieved the following sales by quarter for 2021 Q1 $450,000, Q2 $515,000, Q3 $670,000, Q4 $325,000 As of the end of Q1, the company projected that they would achieve 95 of the target As of the end of Q2, Acme's Northwest area had achieved $965000 in sales year to date but expected to make up lost ground in Q3 with the start of the new school year As of the end of Q2 they projected they would achieve 85 of the target After a disappointing performance in Q3, the company adjusted theri projections for the rest of the year end determined that it was unlikely they would meet 80 of their target Please calculate the amount of commission expense in Q2 of 2021 What would an adjusting entry look like to record the bonus compensation in Q2 of 2021 (according to the information known at the time) In journal entry form Please calculate the adjustment to the bonus compensation payable in Q3 of 2021 (according to the information known at the time)

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jun 28, 2024

Acme supply Co. has an incentive compensation plan and a tiered bonus structure. Area Managers receive a targeted bonus equal to 20% of their salaries

Acme supply Co. has an incentive compensation plan and a tiered bonus structure.

Area Managers receive a targeted bonus equal to 20% of their salaries if their area achieves their target sales target. This bonus is tiered from 80-120% of the targeted sales goal. This means that the Area manager will receive between 16%-24% of their salary depending on the sales achieved. For example, if they make 90% of the sales goal, they will earn 18% of their salary as a bonus (calculated by taking 90% of the 20%). No bonus is earned if less than 80% of their sales target is achieved and the bonus will be capped at 24% of their salary. Bonuses are paid annually in February of the year following the fiscal year ending December 31.

Acme Compensates the local store managers with 8% commission on sales in addition to their hourly rates. Commissions are paid quarterly on the 15th of the month following the commission period.

The following data is relevant the Northwest Area's performance during 2021

The Northwest area had a $2,600,000 sales target for 2021
The Area Manager for the Northwest Area earned a base salary of $125,000 per year.
Acme's Northwest area achieved the following sales by quarter for 2021: Q1-$450,000, Q2-$515,000, Q3- $670,000, Q4-$325,000
As of the end of Q1, the company projected that they would achieve 95% of the target
As of the end of Q2, Acme's Northwest area had achieved $965000 in sales year to date but expected to make up lost ground in Q3 with the start of the new school year. As of the end of Q2 they projected they would achieve 85% of the target.
After a disappointing performance in Q3, the company adjusted theri projections for the rest of the year end determined that it was unlikely they would meet 80% of their target.

Please calculate the amount of commission expense in Q2 of 2021
What would an adjusting entry look like to record the bonus compensation in Q2 of 2021. (according to the information known at the time) - In journal entry form
Please calculate the adjustment to the bonus compensation payable in Q3 of 2021 (according to the information known at the time)