On December 31, 2017, Cocoa Incorporated Had Total Liabilities of $80,000

question 65

Essay

On December 31, 2017, Cocoa Incorporated had total liabilities of $80,000 and total shareholders' equity of $100,000, resulting in a debt/equity ratio of 0.80 before executive bonus expense is recognized. During 2017, Cocoa's CEO earned a 5% bonus on net income before bonus of $100,000. If Cocoa pays the bonus due its CEO on December 31, 2017, what is Cocoa's debt/equity ratio after the bonus expense and what related liability is recognized?

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Definitions:

Retention

The ability to keep or hold on to information, people, or objects over a period of time.

Organizational Socialization

The process by which a new employee learns the values, skills, behaviors, and social knowledge necessary for successful integration into an organization.

Absorbed Culture

The process where individuals unconsciously adopt the values, beliefs, and norms of a culture through socialization and day-to-day interactions.

Organization Members

Individuals who belong to, and participate in, the collective activities of an organization.