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Please refer to Table 4-2 for the following questions. Table 4-2 Drummond Company Balance Sheet Assets: Cash and marketable securities $400,000 Accounts receivable 1,415,000 Inventories
Please refer to Table 4-2 for the following questions. Table 4-2
Drummond Company |
Balance Sheet |
Assets: | ||
Cash and marketable securities | $400,000 | |
Accounts receivable | 1,415,000 | |
Inventories | 1,847,500 | |
Prepaid expenses | 24,000 | |
Total current assets | 3,686,500 | |
Fixed assets | 2,800,000 | |
Less: accum. depr. | (1,087,500) | |
Net fixed assets | 1,712,500 | |
Total assets | $5,399,000 | |
Liabilities: | ||
Accounts payable | $600,000 | |
Notes payable | 875,000 |
Accrued taxes | 92,000 |
Total current liabilities | $1,567,000 | |
Long-term debt | 900,000 | |
Common Stock (100,000 shares) | 700,000 | |
Retained Earnings | 2,232,000 | |
Total liabilities and owner's equity | $5,399,000 | |
Net sales (all credit) | $6,375,000 | |
Less: Cost of goods sold | (4,375,000) | |
Selling and administrative expense | (1,000,000) | |
Depreciation expense | (135,000) | |
Interest expense | (100,000) | |
Earnings before taxes | $765,000 | |
Income taxes | (306,000) | |
Net income | $459,000 | |
Based on the information in Table 4-2, the return on equity is
- A. 18.47%.
- B. 15.65%.
- C. 19.33%.
- D. 16.66%.
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