Preparing a corporate balance sheet, and measuring profitability The following accounts and December 31, 2012, balances of Georgia Optical Corporation are arranged in no particular order.
|
Retained earnings |
$ 99,000 |
Common stock, $4 par |
|
|
Inventory |
106,000 |
125,000 shares authorized, |
|
|
Property, plant, and equipment, net |
277,000 |
25,000 shares issued |
$ 100,000 |
|
Prepaid expenses |
14,000 |
Dividends payable |
6,000 |
|
Goodwill |
61,000 |
Paid in capital in excess of par—common |
160,000 |
|
Accrued liabilities payable |
15,000 |
Accounts payable |
33,000 |
|
Long term note payable |
103,000 |
Preferred stock, 5%, $14 par, |
|
|
Accounts receivable, net |
107,000 |
50,000 shares authorized, |
|
|
Cash |
49,000 |
7,000 shares issued |
98,000 |
|
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.