Question

In 2015, Pennington Corporation had net sales of $596,900 and cost of goods sold of $357,900. Operating expenses were $151,200, and interest expense was $6,000. The corporation’s tax rate is 31%. The corporation declared preferred dividends of $13,100 in 2015, and its average common stockholders’ equity during the year was $194,700. Prepare an income statement for Pennington Corporation. PENNINGTON CORPORATION Income Statement For the Year Ended December 31, 2015 $ $ LINK TO TEXT Compute Pennington Corporation’s return on common stockholders’ equity for 2015. (Round answer to 1 decimal place, e.g. 10.5%.) Return on common stockholders’ equity %

Answer 1

Pennington Corporation
Income Statement for the Year Ended December 31
Net sales	$5,96,900
COGS	$3,57,900
Gross profit	$2,39,000
Operating expenses	$1,51,200
EBIT	$87,800
Interest	$6,000
EBT	$81,800
Taxes (31%)	$25,358
Net income	$56,442
Preference dividend	$13,100
Net income available to common stockholders	$43,342

Return on common stockholders equity = Net income available to common stockholders / average stockholders equity

= 43342 / 194700

= 22.3%