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Posts: 151
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9 months ago
Settles Corporation has provided the following financial data: | Balance Sheet | | December 31, Year 2 and Year 1 | | Year 2 | Year 1 |
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| Assets | | |
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| Current assets: | | |
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| Cash | $ 142,000 | $ 110,000 |
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| Accounts receivable, net | 104,000 | 120,000 |
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| Inventory | 119,000 | 120,000 |
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| Prepaid expenses | 37,000 | 40,000 |
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| Total current assets | 402,000 | 390,000 |
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| Plant and equipment, net | 717,000 | 720,000 |
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| Total assets | $ 1,119,000 | $ 1,110,000 |
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| Liabilities and Stockholders' Equity | | |
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| Current liabilities: | | |
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| Accounts payable | $ 156,000 | $ 180,000 |
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| Accrued liabilities | 84,000 | 70,000 |
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| Notes payable, short term | 66,000 | 60,000 |
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| Total current liabilities | 306,000 | 310,000 |
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| Bonds payable | 250,000 | 250,000 |
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| Total liabilities | 556,000 | 560,000 |
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| Stockholders’ equity: | | |
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| Common stock, $4 par value | 240,000 | 240,000 |
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| Additional paid-in capital | 90,000 | 90,000 |
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| Retained earnings | 233,000 | 220,000 |
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| Total stockholders’ equity | 563,000 | 550,000 |
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| Total liabilities & stockholders’ equity | $ 1,119,000 | $ 1,110,000 |
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| Income Statement | | For the Year Ended December 31, Year 2 | | Sales (all on account) | $ 1,360,000 |
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| Cost of goods sold | 850,000 |
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| Gross margin | 510,000 |
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| Operating expenses | 462,692 |
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| Net operating income | 47,308 |
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| Interest expense | 19,000 |
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| Net income before taxes | 28,308 |
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| Income taxes (35%) | 9,908 |
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| Net income | $ 18,400 |
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Dividends on common stock during Year 2 totaled $5,400. The market price of common stock at the end of Year 2 was $5.89 per share. The company’s return on total assets for Year 2 is closest to: ▸ 2.75% ▸ 1.64% ▸ 1.65% ▸ 2.76%
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