Table 4-2 Johnson Company Balance Sheet Assets: Cash and marketable securities $
ID: 2665840 • Letter: T
Question
Table 4-2Johnson Company
Balance Sheet
Assets:
Cash and marketable securities $300,000
Accounts receivable 1,215,000
Inventories 1,747,500
Prepaid expenses 24,000
Total current assets 3,286,500
Fixed assets 2,700,000
Less: accum. depr. (1,087,500)
Net fi xed assets 1,612,500
Total assets $4,899,000
Liabilities:
Accounts payable $240,000
Notes payable 825,000
Accrued taxes 42,000
Total current liabilities $1,107,000
Long-term debt 975,000
Common Stock (100,000 shares) 100,000
Retained Earnings 2,717,000
Total liabilities and owner’s equity $4,899,000
Net sales (all credit) $6,375,000
Less: Cost of goods sold (4,312,500)
Selling and administrative expense (1,387,500)
Depreciation expense (135,000)
Interest expense (127,000)
Earnings before taxes $412,500
Income taxes (225,000)
Net income $ 187,500
Common stock dividends $97,500
Change in retained earnings $90,000
22) Based on the information in Table 4-2, the return on equity is
a. 6.90%.
b. 5.47%.
c. 6.66%.
d. 3.46%.
Explanation / Answer
c. 6.66%.Working: Net income 187500 Equity: Common Stock 100000 Retained Earnings 2717000 Equity: 2817000 Return On Equity = Net Income / Share holders Equity = (187500 / 2817000)*100 = 6.66% Net income 187500 Equity: Common Stock 100000 Retained Earnings 2717000 Equity: 2817000 Return On Equity = Net Income / Share holders Equity = (187500 / 2817000)*100 = 6.66%
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