Your company has a travel policy that reimburses employees for the ordinary and necessary costs...
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Accounting
Your company has a travel policy that reimburses employees for the ordinary and necessary costs of business travel. Employees often mix a business trip with pleasure by either extending the time at the destination or traveling from the business destination to a nearby resort or other personal destination. When this happens, an allocation must be made between the business and personal portions of the trip. However, the travel policy is unclear on the allocation method to follow.
Consider this example. An employee obtained a business-class ticket for $9,558 and traveled the following itinerary:
From
To
Miles
One-Way Regular Fare
Purpose
Chicago
Paris
4,170
$
3,720
Business
Paris
Rio de Janeiro
5,770
4,450
Personal
Rio de Janeiro
Chicago
5,290
3,100
Return
On the date of the flights between Chicago and Paris (and return), a restricted round-trip fare of $4,980 was available.
Required:
a. Compute the business portion of the airfare and state the basis for the indicated allocation that is appropriate according to each of the following independent scenarios:
1. Based on the maximum reimbursement for the employee.
2. Based on the minimum cost to the company.
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