Question

Hot Dawgs! Inc. has 3 managers that work in shifts throughout the day and night. The company also employs 4 cooks and 2 waitresses per shift. There are 3 shifts: morning, afternoon, and evening. The managers are paid an annual salary with a 2% bonus every December. The managers also have 20 hours of paid vacation time that they are allotted every year. The 4 cooks are paid hourly and can only work 1 shift per day. The waitstaff is also paid at an hourly rate as well, and the servers can keep all of their tips. Hot Dawgs! Inc utilizes the matching principle of accounting to determine its payroll and has determined that the management bonuses should be reported on the balance sheet as an asset for the company. The owners will also include the tips in the income statement as retained earnings when calculated the revenue for the period. Identify the problem with Hot Dawgs! Inc. payroll accounting, and in 1 paragraph recommend a solution.