The Following Information Pertains to Dallas Company Liabilities and Stockholders' Equity

question 7

Multiple Choice

The following information pertains to Dallas Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. Assets $$\begin{array} { l r } \text { Cash and short-term investments } & \$ 40,000 \\\text { Accounts receivable (net) } & 30,000 \\\text { Inventory } & 25,000 \\\text { Property, plant, and equipment } & 280,000 \\\text { Total assets } & \$ 375,000\end{array}$$ Liabilities and Stockholders' Equity $$\begin{array} { l r } \text { Current liabilities } & \$ 60,000 \\\text { Long-term liabilities } & 95,000 \\\text { Common stock, } \$ 20 \text { par } & 120,000 \\\text { Retained earnings } & 100,000 \\\text { Total liabilities and stockhol ders' equity } & \$ 375,000\end{array}$$ Income Statement $$\begin{array} { l r } \text { Sales } & \$ 90,000 \\\text { Cost of goods sold } & 45,000 \\\text { Gross margin } & \$ 45,000 \\\text { Operating expenses } & 15,000 \\\text { Net income } & \$ 30,000\end{array}$$ $$\begin{array} { l r } \text { Number of shares of common stock } & 6,000 \\\text { Market price of common stock } & \$ 20 \\\text { Dividends per share } & \$ 1.00 \\\text { Cash provided by operations } & \$ 40,000\end{array}$$

What is the return on stockholders' equity?

• A) 7.3%
• B) 13.6%
• C) 20.5%
• D) 40.9%

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Definitions:

Expected Norms

The unwritten rules or behaviors that are considered standard, appropriate, or typical within a specific group, community, or culture.

Particular Situation

A specific set of circumstances or state of affairs at a given time.

Behavior

The actions or reactions of an individual or group in response to external or internal stimuli.

Transferring of Information

The process of conveying data, knowledge, or details from one person, place, or system to another.