The following selected data were taken from the financial statements of Squiggle

Question

The following selected data were taken from the financial statements of Squiggle Group Inc. for December 31, 2016, 2015 and 2014:

The 2016 net income was $20,745, and the 2015 net income was $15,050. No dividends on common stock were declared between 2014 and 2016.

a. Determine the rate earned on total assets, the rate earned on stockholders' equity, and the rate earned on common stockholders' equity for the years 2015 and 2016. When required, round to one decimal place.

December 31 2016 2015 2014 Total assets $294,000 $265,000 $236,000 Notes payable (10% interest) 100,000 100,000 100,000 Common stock 40,000 40,000 40,000 Preferred 6% stock, $100 par 20,000 20,000 20,000 (no change during year) Retained earnings 93,395 73,850 60,000

Explanation / Answer

Ans. a

                                                                                          2016                          2015

Rate earned on total assets                                                     7.06%                           5.68%

                                                                                      (20745/294000)X100       (15050/265000)X100

Rate earned on stockholder equity                                            13.52%                         11.24%

                                                                                (20745/153395)X100 (15050/133850)X100

Rate earned on common stockholders equity                             15.55% 13.22%

                                                                                      (20745/133395)X100       (15050/113850)X100

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