The following selected financial information was obtained from the 2017 financial reports of Robotronics Inc. and Technology, Limited:

Assume that total assets, total liabilities, and total shareholders€™ equity were constant throughout 2017.

REQUIRED:
a. Assume that you are considering purchasing the common stock of one of these companies. Which company has a higher return on equity? Would your conclusion be different if the impact of the unusual gain on bond redemption had not been included in net income? Should unusual items be considered? Why or why not?
b. Which company uses leverage more effectively? Does your answer change if you do not consider the impact of the gain on net income?

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Robotronics Inc. Technology Ltd. $ 100,000 $ 175,000 Interest expense Gain on bond redemption (net of taxes of $320,000) 1,300,000 Net income (including gain) 1,675,000 610,000 Current liabilities 140,000 25,000 Bonds payable 725,000 Mortgage payable 1,490,000 405,000 Common stock 715,000 925,000 Retained earnings 290,000 515,000 Total liabilities and shareholders' equity $3,360,000 $1,870,000