A corporation has annual sales of $18 million,total assets of $4 million,a debt ratio of 40%,depreciation expense of $200,000,and a tax rate of 40%.The corporation's total stockholders' equity is equal to
A) $5,600,000.
B) $2,800,000.
C) $2,400,000.
D) $1,800,000.

Question

Quizplus · Accepted Answer

Total liabilities can be calculated by using the debt ratio, which is 40%:
Total liabilities = Total assets x Debt ratio
Total liabilities = $4,000,000 x 0.40
Total liabilities = $1,600,000

Therefore, total stockholders' equity can be calculated by subtracting total liabilities from total assets:
Total stockholders' equity = Total assets - Total liabilities
Total stockholders' equity = $4,000,000 - $1,600,000
Total stockholders' equity = $2,400,000

The other information provided, such as annual sales and depreciation expense, is not relevant to calculating total stockholders' equity.

A Corporation Has Annual Sales of $18 Million,total Assets of $4