Settles Corporation has provided the following financial data:Balance SheetDecember 31, Year 2 and Year 1AssetsYear 2Year 1Current assets: Cash$142,000 $110,000 Accounts receivable, net 104,000 120,000 Inventory 119,000 120,000 Prepaid expenses 37,000 40,000 Total current assets 402,000 390,000 Plant and equipment, net 717,000 720,000 Total assets$1,119,000 $1,110,000 Liabilities and Stockholders' Equity Current liabilities: Accounts payable$156,000 $180,000 Accrued liabilities 84,000 70,000 Notes payable, short term 66,000 60,000 Total current liabilities 306,000 310,000 Bonds payable 250,000 250,000 Total liabilities 556,000 560,000 Stockholders' equity: Common stock, $4 par

Question

value 240,000  240,000 Additional paid-in capital 90,000  90,000 Retained earnings 233,000  220,000 Total stockholders' equity 563,000  550,000 Total liabilities & stockholders' equity$1,119,000 $1,110,000 Income StatementFor the Year Ended December 31, Year 2Sales (all on account)$1,360,000 Cost of goods sold 850,000 Gross margin 510,000 Operating expenses 462,692 Net operating income 47,308 Interest expense 19,000 Net income before taxes 28,308 Income taxes (35%) 9,908 Net income$18,400 Dividends on common stock during Year 2 totaled $5,400. The market price of common stock at the end of Year 2 was $5.89 per share.The company's return on equity for Year 2 is closest to:

A. 3.31%
B. 5.09%
C. 8.50%
D. 50.52%

Answer 1

Answer: A