Question Details

Calculate the return on common stockholders' equity ratio 




1.	The following information is available from the balance sheets at the end of 2014 and 2013 for Shelley Company:

	2014	2013
Accounts payable 	$     80,000	$     40,000
Accrued liabilities  	65,000	25,000
Taxes payable 	10,000	20,000
Short-term notes payable	-0-	60,000
Bonds payable due within next year 	     200,000	     200,000
Total current liabilities 	$   355,000	$   345,000
Bonds payable   	$   800,000	$   300,000
Common stock, $5 par 	$1,000,000	$1,000,000
Retained earnings  	     695,000	       55,000
Total stockholders' equity 	$1,695,000	$1,055,000
Total liabilities and stockholders' equity	$2,850,000	$1,700,000

Net income for 2014 and 2013 was $340,000 and $300,000, respectively. Interest expense was $45,000 for 2014 and the tax rate is 30%. Answer the following:

A.	Calculate the return on common stockholders' equity ratio for 2014.
B.	Calculate the return on total assets ratio for 2014.
C.	What is the difference between the return on stockholders' equity and the return on assets?



2.	The following ratios have been computed for Gilbert Company for 2014.

Return on sales	20%
Times-interest-earned ratio	15 
Accounts receivables turnover ratio	5 
Acid-test ratio	1.60 : 1
Current ratio	3 : 1
Debt ratio	26%

Gilbert Company's 2014 financial statements with missing information follow:

GILBERT COMPANY
Comparative Balance Sheet
December 31, 2014
Assets	2014		2013
Cash	$  25,000		$  35,000
Short-term Investments	15,000		15,000
Accounts receivable (net)	?	(6)	60,000
Inventory	?	(8)	50,000
Property, plant, and equipment (net)	  200,000		  150,000
	Total assets	$           ?	(9)	$310,000

Liabilities and stockholders' equity
Accounts payable	$           ?	(7)	$  25,000
Short-term notes payable	35,000		30,000
Bonds payable	?	(10)	20,000
Common stock	200,000		200,000
Retained earnings	    59,000		    35,000
	Total liabilities and stockholders' equity	$           ?	(11)	$310,000

GILBERT COMPANY
Income Statement
For the Year Ended December 31, 2014
Net sales		$250,000	
Cost of goods sold		  125,000	
Gross profit		125,000	
Expenses:			
	Depreciation expense	$         ?	(5)	
	Interest expense	5,000		
	Selling expenses	10,000		
	Administrative expenses	15,000		
		Total expenses		              ?	(4)
Income before income taxes		              ?	(2)
	Income tax expense		              ?	(3)
Net income		$            ?	(1)

Required: Use the above ratios and information from the Gilbert Company financial statements to fill in the missing information on the financial statements. Follow the sequence indicated. Show computations that support your answers.



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