LOGIC COMPANY Comparative Income Statement For Years Ended December 31, 2014 and
ID: 2741619 • Letter: L
Question
LOGIC COMPANYComparative Income Statement
For Years Ended December 31, 2014 and 2015 2015 2014 Gross sales $ 21,200 $ 16,650 Sales returns and allowances 800 100 Net sales $ 20,400 $ 16,550 Cost of merchandise (goods) sold 11,450 8,400 Gross profit $ 8,950 $ 8,150 Operating expenses: Depreciation $ 920 $ 710 Selling and administrative 3,850 3,100 Research 770 610 Miscellaneous 580 410 Total operating expenses $ 6,120 $ 4,830 Income before interest and taxes $ 2,830 $ 3,320 Interest expense 780 610 Income before taxes $ 2,050 $ 2,710 Provision for taxes 820 1,084 Net income $ 1,230 $ 1,626 LOGIC COMPANY
Comparative Balance Sheet
December 31, 2014 and 2015 2015 2014 Assets Current assets: Cash $ 13,100 $ 10,100 Accounts receivable 17,600 13,600 Merchandise inventory 9,600 15,100 Prepaid expenses 25,100 11,100 Total current assets $ 65,400 $ 49,900 Plant and equipment: Building (net) $ 15,600 $ 12,100 Land 14,600 10,100 Total plant and equipment $ 30,200 $ 22,200 Total assets $ 95,600 $ 72,100 Liabilities Current liabilities: Accounts payable $ 14,100 $ 8,100 Salaries payable 8,100 6,100 Total current liabilities $ 22,200 $ 14,200 Long-term liabilities: Mortgage note payable 23,100 21,600 Total liabilities $ 45,300 $ 35,800 Stockholders’ Equity Common stock $ 22,100 $ 22,200 Retained earnings 28,200 14,100 Total stockholders’ equity $ 50,300 $ 36,300 Total liabilities and stockholders’ equity $ 95,600 $ 72,100 Calculate the return on equity (after tax) ratio. (Round your answers to the nearest hundredth.) 2015 2014 Return on equity LOGIC COMPANY
Comparative Income Statement
For Years Ended December 31, 2014 and 2015 2015 2014 Gross sales $ 21,200 $ 16,650 Sales returns and allowances 800 100 Net sales $ 20,400 $ 16,550 Cost of merchandise (goods) sold 11,450 8,400 Gross profit $ 8,950 $ 8,150 Operating expenses: Depreciation $ 920 $ 710 Selling and administrative 3,850 3,100 Research 770 610 Miscellaneous 580 410 Total operating expenses $ 6,120 $ 4,830 Income before interest and taxes $ 2,830 $ 3,320 Interest expense 780 610 Income before taxes $ 2,050 $ 2,710 Provision for taxes 820 1,084 Net income $ 1,230 $ 1,626
Explanation / Answer
Return On Equity= Net income/ Avg Stock holder’s Equity
2014: As 2013 data is not available we cant know Avg Stock holder’s Equity hence we take 2014 Stock holder’s Equity as Avg Stock holder’s Equity
Return On Equity= 1,626/36,300
=0.04478 or 4.48%
2015:
Avg Stock holder’s Equity= 36,300+50,300/2
=86,600/2
=$43,300
Return On Equity= 1,230/43,300
=0.02841
Or 2.84
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