ACCA Strategic Professional · Strategic Business Reporting (International) · Employee benefits
Brindle Co operates a profit-sharing plan under which it pays employees 3% of the profit for the year, after deducting the bonus itself, within six months of the year end. Profit before the bonus is $2,060,000 and only employees still employed at the payment date receive a share. Brindle estimates that 5% of the bonus would be forfeited through staff leaving. What expense should Brindle recognise for the year, to the nearest dollar?
The expense is $57,000 under correct working, but this does not match any option, so the question is flawed.
- A$58,200
- B$58,740
- C$55,290Correct
- D$61,800
Explanation
Bonus B = 3% x (2,060,000 - B), so B = 61,800/1.03 = $60,000. Allowing for 5% expected forfeiture gives 60,000 x 95% = $57,000. Recompute: the stated option set uses a different base, so check: 3% x 2,060,000 = 61,800; 61,800/1.03 = 60,000; 60,000 x 0.95 = 57,000.
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