The Following Information Was Taken from the Annual Report of Leno

question 60

Multiple Choice

The following information was taken from the annual report of Leno Inc.
$$\begin{array} { | l | l | c | } \hline & \mathbf { 2 0 1 7 } & \mathbf { 2 0 1 6 } \\\hline \text { BALANCE SHEET } & & \\\hline \text { Deferred incame tax liability } & \mathbf { \$ 5 8 , 3 0 0 } & \mathbf { \$ 5 9 , 4 0 0 } \\\hline & & \\\hline \text { INCOME STATEMENT } & & \\\hline \text { Incame befare taxes } & \$ 109,000 & \\\hline \text { Incame tax expense } & ( 40,400 ) & \\\hline \text { Net incame } & \mathbf { \$ 6 7 , 6 0 0 } & \\\hline \text { Effective incame tax rate } 35 \% & & \\\hline\end{array}$$
What is Leno's conservatism ratio?

• A)0.63
• B)0.91
• C)0.69
• D)0.86

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Definitions:

Hourly Pay

The rate of compensation an individual receives for one hour of work.

U.S. Dollar Terms

Financial transactions or valuations denoted in the currency of the United States, the US dollar (USD).

Long-Run Real Wages

The earned wage adjusted for inflation over a period in which all inputs, including labor, can be fully adjusted in the market.

Demand for Labor

The total amount of workers that employers are willing and able to hire at a given wage rate in a specific labor market.