Question

37. Under what circumstances can revenue on long-term construction contracts be recognized over time according to percentage of completion? Missoula Inc. reported the following selected financial statement data: Dec 31, 2017 Dec 31, 2018 Cash $ 30,000 $ 32,000 Accounts receivable (net) 48,000 52,000 Inventory 68,000 72,000 Plant assets (net) 210,000 218,000 Total assets 405,000 395,000 Liabilities 145,000 145,000 Shareholders' equity 260,000 250,000 Net sales 340,000 400,000 Cost of goods sold 220,000 280,000 Net income 20,000 25,000 Required: Compute the return on shareholders' equity for 2018. Round your answer to one decimal place, e.g., .1234 as 12.3%.

Answer 1

Return on shareholders equity ratio =Net income / Average Common Stockholder's equity

Average Common Stockholder's equity =($260,000+$250,000) / 2 =$255,000

Return on shareholders equity ratio =$25,000 / $255,000 =9.80%