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Homework answers / question archive / Here are comparative statement data for Duke Company and Lord Company, two competitors

Here are comparative statement data for Duke Company and Lord Company, two competitors

Accounting

Here are comparative statement data for Duke Company and Lord Company, two competitors. All balance sheet data are as of December 31, 2020, and December 31, 2019. 
Duke Company Lord Company 2020 2019 2020 2019 Net sales $1,860,000 $561,000 Cost of goods sold 1,030,440 297,330 Operating expenses 265,980 78,540 Interest expense 7,440 3,927 Income tax expense 53,940 6,171 Current assets 327,000 $314,500 83,800 $78,000 Plant assets (net) 522,000 500,300 138,300 123,900 Current liabilities 64,200 75,000 36,800 29,600 Long-term liabilities 108,800 91,400 30,200 25,200 Common stock, $10 par 503,000 503,000 120,500 120,500 Retained earnings 173,000 145,400 34,600 26,600 
(b1) 
Compute the 2020 return on assets and the return on common stockholders' equity ratios for both companies. (Round answers to 1 decimal place, e.g. 12.1%.) 
Duke Company Lord Company 
Return on assets 
Return on common stockholders' equity 
% % 
% % 
 

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  Vertical Income Statement
    DUKE COMPANY LORD COMPANY
  Particulars Amount   Amount  
  Net sales $1,860,000    $561,000   
  Less: Cost of goods sold $1,030,440    $297,330   
  Gross margin $829,560    $263,670   
  Less: Operating expenses $265,980    $78,540   
  Operating income (EBIT) $563,580    $185,130   
  Less: Interest expenses $7,440    $3,927   
  Earnings before tax $556,140    $181,203   
  Less: Income tax expenses $53,940    $6,171   
  Net income $502,200    $175,032   
           
         
           
Ans. 2 Return on assets =   Net income / Average assets * 100      
           
  Duke company $502,200 / $831,900 * 100 60.37%    
  Lord company $175,032 / $212,000 * 100 82.56%    
           
  Return on Common stockholder's equity =   Net income / Average Common stockholder's equity * 100  
           
  Duke company $502,200 / $662,200 * 100 75.84%    
  Lord company $175,032 / $151,100 * 100 115.84%    
           
  * As the return on assets and return on common stockholder's equity of Lord company is higher than Duke company
  so we can say that Lord company is more profitable.      
           
  *CALCULATIONS OF AVERAGE ASSETS:      
           
    DUKE COMPANY LORD COMPANY
    2020 (ending) 2019 (beginning) 2020 (ending) 2019 (beginning)
  Current assets $327,000  $314,500  $83,800  $78,000 
  Plant assets $522,000  $500,300  $138,300  $123,900 
  Total assets $849,000  $814,800  $222,100  $201,900 
           
  *Average assets = (Beginning assets + Ending assets) / 2      
DUKE COMPANY ($814,800+$849,000) / 2      
    $831,900.00       
           
LORD COMPANY ($201,900+$222,100) / 2      
    $212,000.00       
           
  *CALCULATIONS OF AVERAGE EQUITY:      
    DUKE COMPANY LORD COMPANY
    2020 (ending) 2019 (beginning) 2020 (ending) 2019 (beginning)
  Common stock $503,000  $503,000  $120,500  $120,500 
  Retained earnings $173,000  145400 $34,600  $26,600 
  Total equity $676,000  $648,400  $155,100  $147,100 
           
  Average equity =   (Beginning equity + Ending equity) / 2      
DUKE COMPANY ($648,400+$676,000)/2      
    $662,200.00       
           
LORD COMPANY ($147,100+$155,100)/2      
    $151,100       

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