Question:
Security-Rand Corporation determines executive incentive compensation at the end of its fiscal year. At
the end of the first quarter, management estimated that the amount will be $300 million. Depreciation
expense for the year is expected to be $60 million. Also during the quarter, the company realized a gain of
$23 million from selling two of its manufacturing plants.
Required:
What amounts for these items should be reported in the first quarter’s income statement?
Answer:
Incentive compensation $300 million ÷ 4 = $75 million
Depreciation expense $60 million ÷ 4 = $15 million
Gain on sale
Security-Rand Corporation determines executive incentive compensation at the end of its fiscal year. At
the end of the first quarter, management estimated that the amount will be $300 million. Depreciation
expense for the year is expected to be $60 million. Also during the quarter, the company realized a gain of
$23 million from selling two of its manufacturing plants.
Required:
What amounts for these items should be reported in the first quarter’s income statement?
Answer:
Incentive compensation $300 million ÷ 4 = $75 million
Depreciation expense $60 million ÷ 4 = $15 million
Gain on sale
