Turner, a successful executive, is negotiating a compensation plan with his potential employer. The employer has offered to pay Turner a $600,000 annual salary, payable at the rate of $50,000 per month. Turner counteroffers to receive a monthly salary of $40,000 ($480,000 annually) and a $180,000 bonus in 5 years when Turner will be age 65.

a. If the employer accepts Turner's counteroffer, Turner will recognize $660,000 at the time the offer is accepted.

b. If the employer accepts Turner's counteroffer, Turner will recognize as gross income $55,000 per month [ ($480,000 + $180,000) / 12].

c. If the employer accepts Turner's counteroffer, Turner will recognize $40,000 income each month for the year and $180,000 in year 5.

d. If the employer accepts Turner's counteroffer, Turner must recognize imputed interest income on the $180,000 to be received in 5 years.

e. None of these.

Question

Business

Princess Barrera

31 August, 00:12

Turner, a successful executive, is negotiating a compensation plan with his potential employer. The employer has offered to pay Turner a $600,000 annual salary, payable at the rate of $50,000 per month. Turner counteroffers to receive a monthly salary of $40,000 ($480,000 annually) and a $180,000 bonus in 5 years when Turner will be age 65.

a. If the employer accepts Turner's counteroffer, Turner will recognize $660,000 at the time the offer is accepted.

b. If the employer accepts Turner's counteroffer, Turner will recognize as gross income $55,000 per month [ ($480,000 + $180,000) / 12].

c. If the employer accepts Turner's counteroffer, Turner will recognize $40,000 income each month for the year and $180,000 in year 5.

d. If the employer accepts Turner's counteroffer, Turner must recognize imputed interest income on the $180,000 to be received in 5 years.

e. None of these.

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Answers (1)

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Claire Harrison · Answer 1

b. If the employer accepts Turner's counteroffer, Turner will recognize as gross income $55,000 per month [ ($480,000 + $180,000) / 12].

Explanation:

Given that

Turner annual salary = $600,000

Counteroffer to received a monthly salary = $40,000 or $480,000 annually

And, $180,000 bonus in 5 years at the age of 65

So the benefit he will be getting would be after accepting the counter offer is

= ($480,000 + $180,000) : 12 months

= $660,000 : 12 months

= $55,000