Question

her 0012 6o0 1. The following selected data were taken from the financial statements of the Columbus Group for December 31, 2016, 2015, and 2014: tncobe000002.12w mniolod ooal holio 0 ub oo Dec.31, 2015 $2,700,000 1,000,000 no b Dec. 31, 2014 Dec. 31, 2016 $3,000,000 Total assets $2,400,000 Notes payable (9% interest) Common stock Preferred $7 stock, $100 par (no change during 1,000,000 1,000,000 400,000 400,000 400,000 200,000 200,000 200,000 year) Retained earnings 1,126,000 896,000 600,000 The 2016 net income was $422,000 and the 2015 net incom were declared between 2014 and 2016. was $380,000. No dividends on common stock Required: (1) Determine the rate earned on total assets, the rate earned on stockholders' equity, and the rate earned on common stockholders' equity for the years 2016 and 2015. Round to one decimal place. (2) What conclusion can be drawn from these data as to the company's profitability?

Answer 1

Solution() totalasgets Rate eamed Net gncome t9rterestexperse Average total osets 2016 of $Lo00 000 $422,000( ($3,000,000 +200,c)/2 $422,000 t So,oDo 2,850,000 ¢ 512,000 xloo $2,85000 18-00 Ansu

STO7 $380,000 +1,00s ,oDo x 39) $2400 +$240900)/2 συο $380,000+ $ J0,000 $ 2,550,000 3470,000-I00 8-4 90 AnSuer K Rate eamed onstockholdes equib Net 9ncome Avesage stockholders eauiby

20169 $ 422,000 *Ap +1,436, 2 226, 422 000 Xloo 20TT T Amswer 26.290 Stockholdos eawty for 2016 4400000 200,0001126,0 - 1/726,050 stockloldes eaui for20 400000 200,00 896, 0 $4496000

2010 = ド 380,0 41,436,0004 1200/2 $380, 000 1,348, 28-20 Sharehaldes equty r20l $400,000 20000 0o,0 4200/00

Retuon 0 Foteamed on Commmen stocholders auity Net 9ncome-Prefenred divip derd Avesape Commenstockholdes 2016 $200000 x97) $100 422,000 41,526,0t91296)/2 $422,000-414/000 $1,411,000 $ 408,00xIOD $,411,000 28-3 90

Cemmon stockholdexsuit 2016 $400,000+ 12600 1 ae0921 Common Stocdeholdes auol s400,000 +96,000 1,296,00 2015 -( 3200,000 $389.000 (S1,296,000t lo00/ 2 $380 000-14/00 $1,149/000 3 1- 99 Corrmen Stock eajity 2ol 34000D t C09000 410/00000

Ansuer b)2 oohitability aties hous shat Columbus Goup p0Atabili has reducad in 2016 in Compa Sor to 201S-The man Cause is inefhicient uwe ot lon tesm asseti and 3ouscas otinance total asset, Stock Retums holders eauitt md Commen takholdass ee pit has decreased in 4ear 2016 inspite et incsease in net incorme toam $380,000 t04 422 00D-