On January 1, Year 1, the general ledger of a company includes the following account balances:

Accounts	Debit			Credit
Cash	$	44,200
Accounts Receivable		47,500
Supplies		9,000
Equipment		79,000
Accumulated Depreciation				$	10,500
Accounts Payable					16,100
Common Stock, $1 par value					15,000
Additional Paid-in Capital					95,000
Retained Earnings					43,100
Totals	$	179,700		$	179,700

During January Year 1, the following transactions occur:

January		2		Issue an additional 2,200 shares of $1 par value common stock for $44,000.
January		9		Provide services to customers on account, $18,300.
January		10		Purchase additional supplies on account, $6,400.
January		12		Purchase 1,000 shares of treasury stock for $22 per share.
January		15		Pay cash on accounts payable, $18,000.
January		21		Provide services to customers for cash, $50,600.
January		22		Receive cash on accounts receivable, $18,100.
January		29		Declare a cash dividend of $0.30 per share to all shares outstanding on January 29. The dividend is payable on February 15. (Hint: The company had 15,000 shares outstanding on January 1, Year 1, and dividends are not paid on treasury stock.)
January		30		Resell 900 shares of treasury stock for $24 per share.
January		31		Pay cash for salaries during January, $43,500.

7. Analyze the following for the company:

a-1. Calculate the return on equity for the month of January

Choose Numerator	/	Choose Denominator	=	Return on Equity Ratio
	/		=	Return on Equity
	/		=

a-2. If the average return on equity for the industry for January is 2.3%, is the company more or less profitable than other companies in the same industry?

multiple choice 1

• More profitable

• Less profitable

b. How many shares of common stock are outstanding as of January 31, Year 1?

c-1. Calculate earnings per share for the month of January. (Hint: To calculate average shares of common stock outstanding take the beginning shares outstanding plus the ending shares outstanding and divide the total by 2.)

Choose Numerator	/	Choose Denominator	=	Earnings Per Share
	/		=	Earnings Per Share
	/		=

c-2. If earnings per share was $2.40 last year (i.e., an average of $2.40 per month), is earnings per share for January Year 1 better or worse than last years average?

multiple choice 2

• Better

• Worse