I need help with solving for the return on equity. On January 1, 2018, the gener
ID: 1175785 • Letter: I
Question
I need help with solving for the return on equity.
On January 1, 2018, the general ledger of Grand Finale Fireworks includes the following account balances: Accounts Cash Accounts Receivable Supplies Equipment Accumulated Depreciation Accounts Payable Common Stock, $1 par value Paid-in Capital-Excess of Par Retained Earnings Debit Credit $ 43,400 45,900 8,200 71,000 $ 9,700 15,300 17,000 87,000 39,500 $ 168,500 168,500 Totals During January 2018, the following transactions occur: anuary 2 Issue an additional 2,100 shares of $1 par value common stock for $42,000 January 9 Provide services to customers on account, $16,700 January 10 Purchase additional supplies on account, $5,600 January 12 Repurchase 1,000 shares of treasury stock for $20 per share January 15 Pay cash on accounts payable, $17,200 January 21 Provide services to customers for cash, $49,800 January 22 Receive cash on accounts receivable, $17,300 January 29 Declare a cash dividend of $0.20 per share to all shares outstanding on January 29. The dividend is payable on February 15 (Hint: Grand Finale Fireworks had 17,000 shares outstanding on January 1, 2018 and dividends are not paid on treasury stock.) January 30 Reissue 800 shares of treasury stock for $22 per share January 31 Pay cash for salaries during January, $42,706 The following information is available on January 31, 2018 a. Unpaid utilities for the month of January are $6,900Explanation / Answer
6: Analysis:
return on equity = 905/19100 = 4.74%
against industry return of 2.50%
Thus, the company's profitability is much better than industry average.
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1) journal entries: date accounts titles debit $ credit $ 2-Jan cash 42000 common shares 2100 Paid in capital in excess of par CS 39900 9-Jan AR 16700 Service Revenue 16700 10-Jan Supplies 5600 AP 5600 12-Jan Treasury Stock 20000 cash 20000 15-Jan AP 17200 Cash 17200 21-Jan cash 49800 Service Revenue 49800 22-Jan cash 17300 AR 17300 29-Jan Dividend 3620 Dividend payable 3620 (18100*0.20) 30-Jan cash 17600 Treasury Stock 16000 Paid in capital excess of par - TS 1600 31-Jan Salary exp 42700 cash 42700 Adjusted Journal Entries: 31-Jan Utilities exp 6900 AP 6900 31-Jan Supplies exp 8000 Supplies 8000 (8200+5600-5800) 31-Jan Depre exp 1675 Acc Dep - Eq 1675 (71000-10700)/3*12 31-Jan Income tax exp 2700 Accrued income tax 2700