Exercise 3-6 (Calculation of Bonus)

Banzon is the managing partner of Power Partnership. He is given an incentive of 5% bonus on profit. The profit of the partnership is 650,000 and income tax rate is 30%.

Instructions:

1. Bonus is computed based on profit before deduction for bonus and income tax.
2. Bonus is computed based on profit after deduction for bonus but before deduction for income tax
3. Bonus is computed based on profit before deduction for bonus but after deduction for income tax.
4. Bonus is computed based on profit after deduction for both bonus and income tax.