The following information pertains to Dallas Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. What is the return on stockholders' equity?

A) 7.3%
B) 13.6%
C) 20.5%
D) 40.9%

Question

The following information pertains to Dallas Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit.

What is the return on stockholders' equity?

A) 7.3%
B) 13.6%
C) 20.5%
D) 40.9%

Chris Grecco · Accepted Answer

Final Answer : B, Explanation :  Return on stockholders' equity = Net income / Average stockholders' equityNet income = Sales - Cost of goods sold - Operating expenses - Interest expenseNet income = 1,500,000 - 850,000 - 400,000 - 50,000 = 200,000Average stockholders' equity = (Beginning stockholders' equity + Ending stockholders' equity) / 2Average stockholders' equity = (1,000,000 + 2,100,000) / 2 = 1,550,000Return on stockholders' equity = 200,000 / 1,550,000 = 0.136 or 13.6%Therefore, the best choice is B.

The following information pertains to Dallas Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. What is the return on stockholders' equity?

A) 7.3%
B) 13.6%
C) 20.5%
D) 40.9%

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Learning Objectives

Related questions

The following information pertains to Dallas Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit.​​ What is the return on stockholders' equity?A) 7.3%B) 13.6%C) 20.5%D) 40.9%

Definitions

Learning Objectives

Learning Objectives

Related questions

The following information pertains to Dallas Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. What is the return on stockholders' equity?

A) 7.3%
B) 13.6%
C) 20.5%
D) 40.9%