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Calculate the average common stockholders equity

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Reference no: EM131763252

The income statement, statement of retained earnings, and balance sheet for Somerville Company are as follows:

Somerville Company
Income Statement
For the Year Ended December 31, 2016
  Amount   Percent
Net sales $8,281,989   100.0%
Less: Cost of goods sold (5,383,293)   65.0
Gross margin $2,898,696   35.0
Less: Operating expenses (1,323,368)   16.0
Operating income $1,575,328   19.0
Less: Interest expense (50,000)   0.6
Income before taxes $1,525,328   18.4
Less: Income taxes (40%)* (610,131)   7.4
Net income $ 915,197   11.0
* Includes both state and federal taxes.      
Somerville Company
Statement of Retained Earnings
For the Year Ended December 31, 2016
Balance, beginning of period $1,979,155
Net income 915,197
Total $2,894,352
Less: Preferred dividends (80,000)
Dividends to common stockholders (201,887)
Balance, end of period $2,612,465

 

Somerville Company
Comparative Balance Sheets
At December 31, 2015 and 2016
  2015   2016
Assets
Current assets:
Cash $2,875,000   $2,580,000
Marketable securities 800,000   700,000
Accounts receivable (net) 939,776   690,000
Inventories 490,000   260,000
Other 93,000   74,261
   Total current assets $5,197,776   $4,304,261
Property and equipment:
Land $1,575,000   $1,067,315
Building and equipment (net) 1,348,800   1,150,000
   Total long-term assets $2,923,800   $2,217,315
Total assets $8,121,576   $6,521,576
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable, short term $1,170,127   $ 543,641
Accounts payable 298,484   101,500
Current maturity of long-term debt 3,000   2,000
Accrued payables 200,000   57,780
   Total current liabilities $1,671,611   $ 704,921
Long-term liabilities:
Bonds payable, 10% 500,000   500,000
   Total liabilities $2,171,611   $1,204,921
Stockholders' equity:
Preferred stock, $25 par, 8% $1,000,000   $1,000,000
Common stock, $1.50 par 337,500   337,500
Additional paid-in capital* 2,000,000   2,000,000
Retained earnings 2,612,465   1,979,155
   Total stockholders' equity $5,949,965   $5,316,655
Total liabilities and stockholders' equity $8,121,576   $6,521,576
* For common stock only.      

Required:

Note: Round the return on stockholder's equity to two decimal places.

1.  Calculate the average common stockholders' equity.

2.  Calculate the return on stockholders' equity.

Reference no: EM131763252

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