The balance sheets at the end of each of the first two years of operations indic

Question

The balance sheets at the end of each of the first two years of operations indicate the following: Kellman Company Year 2 Year 1 Total current assets $605,185 $561,243 Total investments 60,661 43,086 Total property, plant, and equipment 946,582 775,319 Total current liabilities 113,451 82,897 Total long-term liabilities 316,834 248,761 Preferred 9% stock, $100 par 99,140 99,140 Common stock, $10 par 539,743 539,743 Paid-in capital in excess of par-common stock 64,867 64,867 Retained earnings 478,393 344,240 Using the balance sheets for Kellman Company, if net income is $107,283 and interest expense is $42,761 for Year 2, what is the return on stockholders' equity for Year 2 (round percent to two decimal points)? Select the correct answer. 010.03% 09.62% 07.78% 06.65%

Explanation / Answer

Calculate average stockholder's equity = (1015926.50+99140) = 1115066.50

Return on stockholder's equity = 107283

Return on stockholder's equity = 107283*100/1115066.50 = 9.62%

so answer is b) 9.62%

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