On December 31, 2010, Cocoa Incorporated Had Total Liabilities of $80,000

question 43

Essay

On December 31, 2010, 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 2010, 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, 2010, what is Cocoa's debt/equity ratio after the bonus expense and what related liability is recognized?

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Definitions:

Institutional Contingency Management

A behavioral strategy that employs reinforcement or punishment within institutional settings to promote desired behaviors.

Competency

A measure of an individual's ability to perform a task or job effectively, based on skills, knowledge, and abilities.

Token Economies

A behavioral therapy technique where desired behaviors are reinforced with tokens that can be exchanged for privileges or treats.

Behavior Therapy

A form of psychotherapy that focuses on changing negative behaviors through various techniques such as conditioning and behavioural modification strategies.