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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