Derby Company Pays Its Executives a Bonus of 6 Percent

Multiple Choice

Derby Company pays its executives a bonus of 6 percent of income before deducting the bonus and income taxes.For the quarter ended March 31,20X8,Derby had income before the bonus and income tax of $12,000,000.For the year ended December 31,20X8,Derby estimates that its income before bonus and income taxes will be $70,000,000.For the quarter ended March 31,20X8,what is the amount of the bonus that Derby should deduct on its income statement?

A) $4,200,000
B) $720,000
C) $1,050,000
D) $180,000