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Bonus Concept

This document discusses four different ways that a bonus can be calculated as a percentage of income and taxes: 1. As a percentage of income before bonus and before taxes. 2. As a percentage of income after bonus but before taxes. 3. As a percentage of income after bonus and after taxes. 4. As a percentage of income before bonus but after taxes. For each method, an example calculation is shown using an income of $6,550,000, a 5% bonus rate, and a 30% tax rate to demonstrate how the bonus and tax amounts would be determined.

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Viñas, Diana L.
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121 views

Bonus Concept

This document discusses four different ways that a bonus can be calculated as a percentage of income and taxes: 1. As a percentage of income before bonus and before taxes. 2. As a percentage of income after bonus but before taxes. 3. As a percentage of income after bonus and after taxes. 4. As a percentage of income before bonus but after taxes. For each method, an example calculation is shown using an income of $6,550,000, a 5% bonus rate, and a 30% tax rate to demonstrate how the bonus and tax amounts would be determined.

Uploaded by

Viñas, Diana L.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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BONUS CONCEPT

1. Bonus is expressed as a certain percent of income before bonus and before tax.

2. Bonus is expressed as a certain percent of income after bonus and before tax.

3. Bonus is expressed as a certain percent of income after bonus and after tax.

4. Bonus is expressed as a certain percent of income before bonus and after tax.

Income before tax and before Bonus 6,550,000

Bonus 5%

Income tax rate 30%

1. BEFORE BONUS AND BEFORE TAX.


Income before tax and before bonus 6,550,000
× Bonus rate 5%
BONUS 327,500

2. AFTER BONUS AND BEFORE TAX.


B = B% (Y – B) PROOF:
B = .05 (6,550,000 – B) Income before tax and before bonus 6,550,000
B = 327,500 – 0.05B
Bonus (311,904.76)
0.05B + B = 327,500
1.05B = 327,500 Income after bonus and before tax 6,238,095.24
B = 311,904.76 Bonus (x5%) 311,904.762

3. AFTER BONUS AND AFTER TAX.


B = B% (Y – B – T)
T = T% (Y – B) PROOF:
T = 0.30 (6,550,000 – B) Income before tax and before bonus 6,550,000
B = 0.05 [6,550,000 – B – 0.30 (6,550,000 – B)]
Bonus (221,497.58)
B = 0.05 (6,550,000 – B – 1,965,000 + 0.30B)
B = 327,500 – 0.05B – 98,250 + 0.015B Tax (1,898,550.73)
B = 229,250 – 0.035B Income after bonus and after tax 4,429,951.69
1.035B = 229,250
Bonus (x5%) 221,497.58
B = 221,497.58
T = 0.30 (6,550,000 – 221,497.58)
T = 0.30 (6,328,502.42)
T = 1,898,550.73
4. BEFORE BONUS AND AFTER TAX.
B = B% (Y – T)
B = .05 (6,550,000 – T)
T = T% (Y – B) PROOF:
T = 0.30 (6,550,000 – B)
Income before tax and before bonus 6,550,000
B = 0.05 [6,550,000 – 0.30 (6,550,000 – B)]
B = 0.05 (6,550,000 – 1,965,000 + 0.30B) Tax (1,895,177.66)
B = 229,250 + 0.015B Income before bonus and after tax 4,654,822.34
0.985B = 229,250
B = 232,741.12 Bonus (x5%) 232,741.12
T = 0.30 (6,550,000 – 232,741.12)
T = 0.30 (6,317,258.88)
T = 1,895,177.66

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