Johnson Co. provides an incentive compensation plan whereby its president receives a bonus of 20% of the net income after deducting the bonus but before deducting income tax. Income before tax and bonus is $600,000 and the effective tax rate is 30%. The bonus is a tax-deductible expense. Which of the following statements is true?

A. The bonus is $84,000

B. The bonus is $100,000

C. The tax is $144,000

D. The tax is $160,000

E. The tax is $180,000

F. None of the above.

Suppose that Adidas (a German firm that follows IFRS) will probably lose a lawsuit and the estimated range of damages is $1.0-$1.4 million. On Adidas balance sheet, there should be no effect on assets, an increase in liabilities of $1.2 million, and a decrease in equity of $1.2 million. TRUE OR FALSE?