Question

Emery Corporation Balance Sheet Income Statement ​Assets: ​ ​ ​ ​ Cash ​$250,000 ​ Sales​ (all credit) ​$8,000,000 Accounts receivable ​450,000 ​ Cost of goods sold ​(4,000,000) Inventory ​500,000 ​ Operating expense ​(2,900,000) Net fixed assets ​2,100,000 ​ Interest expense ​(150,000) Total assets ​$3,300,000 ​ Income taxes ​(380,000) ​ ​ ​ Net income ​$570,000 Liabilities and​ owners' equity: ​ ​ ​ ​ Accounts payable ​$100,000 ​ ​ ​ Notes payable ​450,000 ​ ​ ​ Longminusterm debt ​1,050,000 ​ ​ ​ ​ ​ ​ ​ ​ ​Owners' Equity ​1,700,000 ​ ​ ​ Total liabilities and​ owner's equity ​$3,300,000 ​ ​ ​ Based on the information in Table 4minus​3, assuming that the firm has no preferred​ stock, and paid​ $300,000 in common​ dividends, the​ firm's return on equity was

Answer 1

Answer:

RETURN ON EQUITY 33,53%

Explanation:

To calculate the Return on Equity it's necessary to have the total Net Income of the year and the total Owners' Equity.

To calculate the ROE its not necessary to consider the dividends pays, it consider the total income.

ROE: Net Income/owner's equity= $570,000 / $1,700,000= 33,53%

Assets

Cash $250,000

Accounts Receivable $450,000

Inventory $500,000

TOTAL CURRENT ASSETS   1.200,000

Property and Equipment $2.100,000

TOTAL ASSETS   3.300,000

Accounts Payable  $100,000

Notes Payable  $450,000

TOTAL CURRENT LIABILITIES   550,000

Long Term Debt  $1.050,000

TOTAL LIABILITIES   1.600,000

Stockholders' Equity  $1.700,000

TOTAL EQUITY   1.700,000

TOTAL EQUITY & LIABILITIES   3.300,000

Income Statement

Sales $8,000,000

Cost of goods sold -$4,000,000

Operating Expenses -$2,900,000

Net Income Before Taxes and Int $1,100,000

Interest Expenses -$150,000

Net Income Before Taxes $950,000

Income Taxes  -$380,000

Net Income after Taxes $570,000

Dividends $300,000