Question 1 - Calculate liquidity ratios
Kroger Co.'s 2007 financial statements contained the following data (in millions).
|
Current assets
|
$6,755
|
Accounts receivable
|
$773
|
|
Total assets
|
21,215
|
Interest expense
|
488
|
|
Current liabilities
|
7,581
|
Income tax expense
|
633
|
|
Total liabilities
|
16,292
|
Net income
|
1.115
|
|
Cash
|
189
|
|
|
Instructions - Compute these values:
(a) Working capital.
(b) Current ratio.
Question 2 - Calculate current ratio and working capital before and after paying accounts payable
The following financial data were reported by 3M Company for 2006 and 2007 (dollars in millions).
|
3M COMPANY Balance sheet (partial)
|
|
|
2007
|
2006
|
|
Current assets
|
1.8%
|
$1,447
|
|
Cash and cash equivalents
|
3,362
|
3,102
|
|
Accounts receivable, net Inventories
|
2,852
|
2,601
|
|
Other current assets
|
1,728
|
1,796
|
|
Total current assets
|
$9,838
|
$8,946
|
|
Current liabilities
|
$5,362
|
$7,323
|
Instructions
(a) Calculate the current ratio and working capital for 3M for 2006 and 2007.
(b) Suppose that at the end of 2007 3M management used $200 million cash to pay off $200 million of accounts payable. How would its current ratio and working capital have changed?
Question 3 - Compute net pay and record pay for one employee
Joyce Kieffer's regular hourly wage rate is $15, and she receives a wage of l'/2 times the regular hourly rate for work in excess of 40 hours. During a March weekly pay period Joyce worked 42 hours. Her gross earnings prior to the current week were $6,000. Joyce is married and claims three withholding allowances. Her only voluntary deduction is for group hospitalization insurance at $25 per week.
Instructions
(a) Compute the following amounts for Joyce's wages for the current week.
(1) Gross earnings.
(2) PICA taxes. (Assume an 8% rate on maximum of $90,000.)
(3) Federal income taxes withheld. (Use the withholding table in the text, page 497.)
(4) State income taxes withheld. (Assume a 2.0% rate.)
(5) Net pay.
(b) Record Joyce's pay, assuming she is an office computer operator.
Question 4 - Compute maximum PICA deductions
Employee earnings records for Medenciy Company reveal the following gross earnings for four employees through the pay period of December 15.
C. Ogle - $93,500
L. Jeter - $97,600
D. Delgado - $96,100
T. Spivey - $104,000
For the pay period ending December 31, each employee's gross earnings is $4,000.The PICA tax rate is 8% on gross earnings of $100,000.