The Balance Sheets at the End of Each of the First

question 161

Multiple Choice

The balance sheets at the end of each of the first two years of operations indicate the following:
$\text { Kellman Company }$
$\begin{array}{lrr}&\text { Year } 2&\text { Year } 1\\\text { Total current assets } & \$ 600,000 & \$ 560,000 \\\text { Total investments } & 60,000 & 40,000 \\\text { Total property, plant, and equipment } & 900,000 & 700,000 \\\text { Total current liabilities } & 125,000 & 65,000 \\\text { Total long-term liabilities } & 350,000 & 250,000 \\\text { Preferred } 9 \% \text { stock, } \$ 100 \text { par } & 100,000 & 100,000 \\\text { Common stock, } \$ 10 \text { par } & 600,000 & 600,000 \\\text { Paid-in capital in excess of par-Common stock } & 75,000 & 75,000 \\\text { Retained earnings } & 310,000 & 210,000\end{array}$
-Using the balance sheets for Kellman Company, if net income is $150,000 and interest expense is $20,000 for Year 2, what is the return on stockholders' equity for Year 2?

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Definitions:

401(k) Plan

A type of retirement savings plan sponsored by an employer that allows employees to save and invest a portion of their paycheck before taxes are taken out.

PBGC

The Pension Benefit Guaranty Corporation (PBGC) is a U.S. government agency that protects the retirement incomes of American workers in private-sector defined benefit pension plans.

ERISA Fiduciary Advisor

A financial advisor who is required by the Employee Retirement Income Security Act to act in the best interest of participants in retirement plans.

Long-Term Disability Insurance

Insurance that pays a percentage of a disabled employee's salary after an initial period and potentially for the rest of the employee's life.