Question

1) Johnston Enterprise had $268,000 in revenue in May, $41,000 in operating expenses and $152,000 in pay roll expenses. Calculate net income for Johnston Enterprise for the month of May.

a) $75,000

b) $116,000

c) $193,000

d) $88,000

2) Milton's Tires had $154,000 in assets, $66,000 in liabilities, $88,000 in owners equity. Calculate the debt to equity ratio for Milton's company.

a) $6,000

b) $3000

c) $9000

d) $3200

Answer 1

Question 1

Correct answer------------(a) $75,000

Sales	$ 2,68,000.00
Less: Operating expenses	$      41,000.00
Less: Payroll expenses	$ 1,52,000.00
Net income	$      75,000.00

Question 2

Correct answer------------0.75 to 1

The options provided are all incorrect.

Although the correct debt to equity ratio is 0.75 to 1

Debt to equity ratio
Numerator	/	Denominator	=	Debt to equity ratio
Total Liabilities	/	Total Shareholder's equity		Debt to equity ratio
$         66,000.00	/	$      88,000.00		0.75