Burdick Corporation has provided the following financial data from its balance sheet: Sales (all on account)in Year 2 amounted to $1,410,000 and the cost of goods sold was $860,000. The company's equity multiplier at the end of Year 2 is closest to:

Question

Burdick Corporation has provided the following financial data from its balance sheet:  Sales (all on account)in Year 2 amounted to $1,410,000 and the cost of goods sold was $860,000. The company's equity multiplier at the end of Year 2 is closest to:

Quizplus · Accepted Answer

Equity multiplier = Average total assets* ÷ Average stockholders' equity*
= $1,402,500 ÷ $980,500 = 1.43 (rounded)
*Average total assets = ($1,415,000 + $1,390,000)÷ 2 = $1,402,500
**Average stockholders' equity = ($991,000 + $970,000)÷ 2 = $980,500

Burdick Corporation Has Provided the Following Financial Data from Its