Reference no: EM131776093

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.