Q7. Use the following information to answer Q7a, Q7b, Q7c & Q7d

You are the new owner of Kent Co. The company, which was formed in January 2018, has equipment with historic cost of $300,000 being depreciated on a straight-line basis over 5 years. You took over at the end of 2018 and appointed your cousin Natalia, to manage the company. You promise Natalia a bonus of $5,00 if net income is increased by 15% in 2019. At the end of 2019, Natalia presents you with a copy of the income statement. Natalia points out that both sales and net income are up by 15% and asks for the $5,000 bonus.

	2018	2019
Sales	$1,000,000	$1,150,000
CGS	650,000	765,000
Gross margin	350,000	385,000
Selling expenses	120,000	132,000
Admin expenses	90,000	113,500
Depreciation	60,000	47,500
Net Income	80,000	92,000

Use the indices to analyze performance in 2019?

After conducting the analysis and reviewing the books you discover that the equipments residual value had been revised. Will you pay the bonus? State Yes or No and explain the basis for your decision?

. Irrespective of your decision about paying the bonus for 2019, Natalia is your cousin. So, you must keep her as manager during 2020, and you must give her the opportunity to earn a bonus next year. What changes should be made to determination of the bonus for 2020?