Question
Mr. Gilly is the PFO of Petro Incorporated. This year, his compensation package was $912,500. Petro paid him a $730,000 salary during the year and
Mr. Gilly is the PFO of Petro Incorporated. This year, his compensation package was $912,500. Petro paid him a $730,000 salary during the year and accrued an unfunded liability to pay him the $182,500 balance in the year he retires at age 60. Petro Incorporated pays $182,500 deferred compensation to Mr. Gilly in 2026, the year of his retirement.
Required:
- How much compensation income does Mr. Gilly recognize in 2026?
- What is Petro's 2026 tax deduction for the payment to Mr. Gilly?
- What is the effect of the payment on Petros 2026 book income and deferred taxes? Assume a 21 percent tax rate.
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Auditing A Practical Approach
Authors: Robyn Moroney
1st Canadian Edition
978-1118472972, 1118472977, 978-1742165943
