Harris Corporation pays senior management an annual bonus from a bonus pool. The size of the bonus pool is determined as follows.

Reported Net Income Bonus Pool

Less than or equal to $$12$ million $$0$

Greater than $$12$ million,

but less than or equal to $$24$ million $10\%$ of income excess of $$12$ million

a$).$ Assume that senior management expects current earnings to be $$25$ million and next year's earnings to be $$22$ million. What incentive does management of Harris Corporation have for managing earnings?

b$).$ Assume that senior management expects current earnings to be $$20$ million and next year's earnings to be $$29$ million. What incentive does management of Harris Corporation have for managing earnings?

c$).$ Assume that senior management expects current earnings to be $$11$ million and next year's earnings to be $$14$ million. What incentive does management of Harris Corporation have for managing earnings?

d$).$ How might the bonus plan be structured to minimize the incentives for earnings management?

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