Problem 5 Bonus or Profit-sharing In your examination of the financial statements of Nokina Financials, you learn that its president has a profit-sharing agreement with the corporation. The agreement states that the president is to receive a bonus consisting of a basic amount to 10% of the companys net income before deduction of bonus but after deduction of corporate income tax. In addition, the basic bonus will be increased by the companys tax savings because the total amount of bonus if deductible in computing the companys taxable income. (The tax savings is the difference between the income taxes the company would have paid if there were no bonus and the taxes the company must pay after Nokina Financials registered a net income of P100,000 in Year 1 before deduction of the presidents bonus or the corporate income tax.) The company is subject to a corporate income tax of 30% of its income after deducting the presidents bonus.

6. What is the total bonus due to the president for Year 1?

7. What is the corporate income tax for Year 1?

8. What is the total tax savings from the presidents bonus (to be added to this basic bonus of 10% of net income after taxes before deduction of bonus)?

9. What is the net income for Year 1 after deducting the presidents bonus and the corporate income tax?