Orman Company Is a Large International Canning Company Required:
A

question 1

Essay

Orman Company is a large international canning company.Orman uses straight-line depreciation for financial reporting purposes and accelerated depreciation for tax reporting.The company's tax rate is 35%.Selected financial information about Orman appears below.
$\begin{array}{lrrr}\text { Orman Company}\\\text { Selected Financial data}\\\text { December 31,}& 2010 & 2009& 2008\\\text { Property, Plant \& Equipment (net) } & \$ 178,454 & \$ 162,369 & \$ 155,388 \\\text { Total Assets } & 515,685 & 424,545 & 410,256\\\text { Deferred Tax Liability relating to }\\\text { Temporary Depreciation Differences } & 25,138 & 18,245 & 19,689 \\\text { Common Shareholders' Equity } & 302,754 & 298,564 & 289,455\\\\\text { Sales } & \$ 986,258 & \$ 888,965 \\\text { Cost of Goods Sold } & 693,857 & 588,920 \\\text { Depreciation Expense } & 48,265 & 39,640 \\\text { Interest Expense } & 84,253 & 75,689 \\\text { Net Income } & 124.581 & 91.025\end{array}$
Required:
a.Compute the amount of depreciation expense that Orman recognized for income tax purposes for year 2010 and 2009.The amount reported as the deferred tax liability relating to temporary depreciation differences represents the cumulative income tax delayed as of each balance sheet date because Orman uses accelerated depreciation for tax purposes and straight-line depreciation for financial statement reporting.
b.Compute the fixed asset turnover ratio for years 2010 and 2009 using the amounts reported for financial statement purposes.
c.Compute the fixed asset turnover ratio for years 2010 and 2009 using the amounts reported for tax purposes.

Recognize the restrictions imposed by bond indentures on dividend policies.

Understand the considerations for preferring high or low dividend payouts based on various contexts.

Understand how federal monetary policies affect economic growth, interest rates, and the availability of credit.

Recognize the types and purposes of bonds issued by local governments and other entities.

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