Corporate executives sometimes abuse their positions by overpaying themselves at the expense of stockholders

Corporate executives sometimes abuse their positions by overpaying themselves at the expense of stockholders. When that happens are the executives' gains dollar-for-dollar losses to stockholders or can investors lose more or less than the amounts by which the executives profit? Explain thoroughly.


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Sometimes compensation packages include bonuses designed to provide performance incentives to employees

P 13-5 Bonus compensation; algebra

Sometimes compensation packages include bonuses designed to provide performance incentives to employees. The difficulty a bonus can cause accountants is not an accounting problem, but a math problem. The complication is that the bonus formula sometimes specifies that the calculation of the bonus is based in part on the bonus itself. This occurs anytime the bonus is a percentage of income because expenses are components of income, and the bonus is an expense.

Regalia Fashions has an incentive compensation plan through which a division manager receives a bonus equal to 10% of the division’s net income. Division income in 2011 before the bonus and income tax was $150,000. The tax rate is 30%.


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We record and report most changes in accounting principle retrospectively, but sometimes report the changes prospectively

We record and report most changes in accounting principle retrospectively, but sometimes report the changes prospectively. Explain when it is appropriate to report the changes prospectively. Provide examples.

Click here for the solution: We record and report most changes in accounting principle retrospectively, but sometimes report the changes prospectively