Question

The comparative statements of Pharoah Company are presented here: PHAROAH COMPANY Income Statements For the Years Ended December 31 2018 2019 Net sales $1,898,740 $1,758,700 Cost of goods sold 1,066,740 1,014,200 Gross profit 832,000 744,500 Selling and administrative expenses 508,200 487,200 Income from operations 323,800 257,300 Other expenses and losses Interest expense 23,400 21,400 Income before income taxes 300,400 235,900 93,400 Income tax expense 74,400 $207,000 $161,500 Net income PHAROAH COMPANY Balance Sheets December 31 2018 2019 Assets Current assets $60,100 $64,200 Cash Debt investments (short-term) 74,000 50,000 Accounts receivable 126,000 111,000 116,900 Inventory 127,400 Total current assets 387,500 342,100 534,300 Plant assets (net) 663,000 $1,050,500 $876,400 Total assets Liabilities and Stockholders' Equity Current liabilities Accounts paya ble $168,200 $153,600 44,900 43,400 Income taxes payable Total current liabilities 213,100 197,000 234,000 Bonds payable 214,000 447,100 411,000 Total liabilities Stockholders' equity Common stock ($5 par) 290,000 300,000 Retained earnings 313,400 165,400 Total stockholders' equity 465,400 603,400 $1,050,500 $876,400 Total liabilities and stockholders' equity

Answer 1

Ans. A	First of all, we will calculated no. of common shares outstanding for both years
	and average common shares outstanding.
	Common shares outstanding = Common stock / Par value
	2019	$290,000 / $5	58000	shares
	2018	$300,000 / $5	60000	shares
	Average common shares outstanding = (Beginning shares + Ending shares) / 2
		(60,000 + 58,000) / 2
		59,000 shares
	Earnings per share = Net income / Average Common shares outstanding
		$207,000 / 59,000
		$3.51
Ans. B	Return on Common stockholder's equity =   Net income / Average Common stockholder's equity * 100
		$207,000 / 534,400 * 100
		38.74%
	* Average Stockholder's equity =   (Beginning equity + Ending equity) / 2
		($465,400 + $603,400) / 2
		$534,400
Ans. C	Return on assets =   Net income / Average assets * 100
		$207,000 / $963,450 * 100
		21.49%
	*Average assets = (Beginning assets + Ending assets) / 2
		($876,400 + $1,050,500) / 2
		$963,450
Ans. D	Current ratio   =   Total current assets / Total current liabilities
		$387,500 / $213,100
		1.82 : 1