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Accounting for employee bonuses

For the year ended 12/31/02, ABC companny has implemented an employee bonus program equal to 3% of ABC's net income before bonus expenses, which employees will share equally. ABC's net income before bonus expenses is expected to be $500,000 and the bonus expense is computed off of that.

Compute the amount of bonus payable to employees at year end.

Prepare the journal entry @ 12/31/02 to record the bonus due to employees.

Prepare the journal entry @ 1/19/03 to record the payment of the bonus to employees.

Solution Preview

The bonus expense will be 3% of $500,000 = $15,000.

The entry to record the bonus due the ...

Solution Summary

This solution looks at how to calculate and prepare journal entries for recording and paying out employee bonuses.