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Kearin Corporation has provided the following financial data: Balance Sheet December 31, Year 2 and Year 1 Assets Year 2 Year 1 Current assets: Cash

Kearin Corporation has provided the following financial data:

Balance Sheet December 31, Year 2 and Year 1
Assets Year 2 Year 1
Current assets:
Cash $33,000 $100,000
Accounts receivable 281,000 250,000
Inventory 122,000 130,000
Prepaid expenses 68,000 80,000
Total current assets 504,000 560,000
Plant and equipment, net 1,016,000 980,000
Total assets $1,520,000 $1,540,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $80,000 $100,000
Accrued liabilities 31,000 30,000
Notes payable, short term 56,000 70,000
Total current liabilities 167,000 200,000
Bonds payable 260,000 260,000
Total liabilities 427,000 460,000
Stockholders' equity:
Common stock, $5 par value 500,000 500,000
Additional paid-in capital-common stock 70,000 70,000
Retained earnings 523,000 510,000
Total stockholders' equity 1,093,000 1,080,000
Total liabilities & stockholders' equity $1,520,000 $1,540,000

Income StatementYear 2 For the Year Ended December 31, Year 2
Sales (all on account) $1,300,000
Cost of goods sold 800,000
Gross margin 500,000
Operating expenses 448,692
Net operating income 51,308
Interest expense 19,000
Net income before taxes 32,308
Income taxes (35%) 11,308
Net income $21,000

Dividends on common stock during Year 2 totaled $8,000. The market price of common stock at the end of Year 2 was $2.02 per share. The company's net profit margin percentage for Year 2 is closest to:

3.9%

2.5%

38.5%

1.6%

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