Question

Vega Company expects to pay a 4% bonus on net income after deducting the bonus. Assume the company reports net income of $ 130, 000 before the calculation of the bonus. The journal entry to record the accrued bonus includes

A. a debit to Employee Bonus Payable, $ 5, 000.
B. a debit to Employee Bonus Expense, $ 5, 200.
C. a credit to Employee Bonus Payable, $ 5, 000.
D. a credit to Cash, $ 5, 200

Answer 1

The correct journal entry to record the accrued bonus is a debit to Employee Bonus Expense, $5,200. The corresponding credit is made to Employee Bonus Payable.

Step-by-step explanation:

The correct journal entry to record the accrued bonus would be:

B. a debit to Employee Bonus Expense, $5,200

When the company expects to pay a bonus based on net income, it needs to record the expense in the accounting records. The debit to Employee Bonus Expense represents the increase in expenses due to the expected bonus amount of $5,200.

The corresponding credit would be made to a liability account called Employee Bonus Payable to reflect the company's obligation to pay the bonus to its employees.