Kearin Corporation has provided the following financial data:Balance SheetDecember 31, Year 2 and Year 1AssetsYear 2Year 1Current assets: Cash$33,000 $100,000 Accounts receivable, net 281,000 250,000 Inventory 122,000 130,000 Prepaid expenses 68,000 80,000 Total current assets 504,000 560,000 Plant and equipment, net 1,016,000 980,000 Total assets$1,520,000 $1,540,000 Liabilities and Stockholders' Equity Current liabilities: Accounts payable$80,000 $100,000 Accrued liabilities 31,000 30,000 Notes payable, short term 56,000 70,000 Total current liabilities 167,000 200,000 Bonds payable 260,000 260,000 Total liabilities 427,000 460,000 Stockholders' equity: Common stock, $5 par
value 500,000 500,000 Additional paid-in capital 70,000 70,000 Retained earnings 523,000 510,000 Total stockholders' equity 1,093,000 1,080,000 Total liabilities & stockholders' equity$1,520,000 $1,540,000 Income StatementFor the Year Ended December 31, Year 2Sales (all on account)$1,300,000 Cost of goods sold 800,000 Gross margin 500,000 Operating expenses 448,692 Net operating income 51,308 Interest expense 19,000 Net income before taxes 32,308 Income taxes (35%) 11,308 Net income$21,000 Dividends on common stock during Year 2 totaled $8,000. The market price of common stock at the end of Year 2 was $2.02 per share.The company's gross margin percentage for Year 2 is closest to:
A. 4.2%
B. 38.5%
C. 2381.0%
D. 62.5%
Answer: B
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