Question: Accounting research suggests that managers of firms with bonus plans are more likely to choose accounting procedures that shift reported earnings from future periods to the current period. In light of this finding, consider how managers might behave given the following situations:
1. Earnings are far below the target level for the bonus.
2. Earnings are just slightly below the target level for the bonus.
3. Earnings are above the upper limit provided by the bonus plan; no bonus would be paid beyond this upper limit.