Foundational [LO15-2, LO15-3, LO15-4, LO15-5, LO15-6] Markus Company\'s common s

Question

Foundational [LO15-2, LO15-3, LO15-4, LO15-5, LO15-6] Markus Company's common stock sold for $2.50 per share at the end of this year. The company paid a common stock dividend of $0.40 per share this year. It also provided the following data excerpts from this year's financial statements: Ending Beginning Balance $31,500 47800 $ 56,000 46,300 $50,800 56,000 $138,300 150,100 $ 417000 405,300 $ 57,000 39,000 $117000 105,300 $ 114,000 114,000 $300,000 300,000 $ 417,000 405,300 Balance Cash Accounts receivable Current assets Total assets Current liabilities Total liabilities Common stock, $1 par value Total stockholders' equity Total liabilities and stockholders' equity Sales (all on account) Cost of goods sold Gross margin Net operating income Interest expense Net income This Year $ 650,000 $ 377,000 $ 273,000 $120,750 $7000 $ 96,900

Explanation / Answer

Answer 5.

Beginning Stockholders’ Equity = $300,000
Ending Stockholders’ Equity = $300,000

Average Stockholder’s Equity = (Beginning Stockholders’ Equity + Ending Stockholders’ Equity) / 2
Average Stockholder’s Equity = ($300,000 + $300,000) / 2
Average Stockholder’s Equity = $300,000

Return on Equity = Net Income / Average Stockholder’s Equity
Return on Equity = $96,900 / $300,000
Return on Equity = 32.30%

Answer 6.

Number of shares outstanding = Value of Common Stock / Par Value
Number of shares outstanding = $114,000 / $1.00
Number of shares outstanding = 114,000

Book Value per share = Stockholders’ Equity / Number of shares outstanding
Book Value per share = $300,000 / 114,000
Book Value per share = $2.63

Answer 7.

Working Capital = Current Assets - Current Liabilities
Working Capital = $138,300 - $57,000
Working Capital = $81,300

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $138,300 / $57,000
Current Ratio = 2.43

Answer 8.

Acid-test Ratio = (Current Assets - Inventory) / Current Liabilities
Acid-test Ratio = ($138,300 - $50,800) / $57,000
Acid-test Ratio = 1.54

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