Jay Corporation has earned $175,900 after tax. The accountant calculated the return on equity as 12.5%. Jay Corporation's stockholders' equity to the nearest dollar is:
A)$140,720
B)$14,720
C)$1,407,200
D)$140,720,000
E)None of these

Question

Quizplus · Accepted Answer

Return on equity (ROE) = Net income / Stockholders' equity
12.5% = $175,900 / Stockholders' equity
Stockholders' equity = $175,900 / 0.125
Stockholders' equity = $1,407,200 rounded to the nearest dollar. Therefore, the best choice is (C).

Jay Corporation Has Earned $175,900 After Tax