Problem

Preparing a corporate balance sheet, and measuring profitability [40-50 min]The following...

Preparing a corporate balance sheet, and measuring profitability [40-50 min]

The following accounts and December 31, 2012, balances of Georgia Optical Corporation are arranged in no particular order.

Total assets, Dec 31, 2011 ........	$ 505,000
Common equity, Dec 31, 2011.....	305,000
Net income, 2012...............	45,000
Interest expense, 2012 ...........	3,500

Requirements

1. Prepare the company’s classified balance sheet in account format at December 31, 2012.
2. Compute Georgia Optical’s rate of return on total assets and rate of return on common stockholders’ equity for the year ended December 31, 2012.
3. Do these rates of return suggest strength or weakness? Give your reasoning.