Information for Swifty Corporation is given below: Swifty Corporation Balance Sh
ID: 2531623 • Letter: I
Question
Information for Swifty Corporation is given below:
Swifty Corporation
Balance Sheet
December 31, 2018
Assets
Equities
$ 318000
$ 626000
1940000
185000
2436000
230000
1850000
1984000
264000
750000
75000
$7017000
1121000
2482000
(227000)
$7017000
Swifty Corporation
Income Statement
Year Ended December 31, 2018
$9500000
6200000
3300000
1400000
1900000
440000
$ 1460000
Additional information:
There are no preferred dividends in arrears, the balances in the Accounts Receivable and Inventory accounts are unchanged from January 1, 2018, and there were no changes in the Bonds Payable, Preferred Stock, or Common Stock accounts during 2018. Assume that preferred dividends for the current year have not been declared.
The rate of return for 2018 based on the year-end common stockholders' equity was
Swifty Corporation
Balance Sheet
December 31, 2018
Assets
Equities
Cash$ 318000
Accounts payable$ 626000
Accounts receivable (net)1940000
Income taxes payable185000
Inventories2436000
Miscellaneous accrued payables230000
Plant and equipment, Bonds payable (8%, due 2020)1850000
net of depreciation1984000
Preferred stock ($100 par, 6% Patents264000
cumulative nonparticipating)750000
Other intangible assets75000
Common stock (no par, 60,000 Total Assets$7017000
shares authorized, issued and outstanding)1121000
Retained earnings2482000
Treasury stock-1500 shares of preferred(227000)
Total Equities$7017000
Swifty Corporation
Income Statement
Year Ended December 31, 2018
Net sales$9500000
Cost of goods sold6200000
Gross profit3300000
Operating expenses (including bond interest expense)1400000
Income before income taxes1900000
Income tax440000
Net income$ 1460000
Explanation / Answer
Answer:
1415000 ÷ 3558000.
Working notes for the above answer is as under
rate of return on common stockholders equity
=Net incone- preffered Devidend / Common stock equity
=(1460000-(750,000*6%) / (1121,000+2482,000-45000)
=1460000-45000 /3558,000
=1415000 /3558,000