Calculating the Average Common Stockholders' Equity and the Return on Stockholders' Equity The income statement, statement of retained earnings, and balance sheet for Somerville Company are as follows: Somerville Company Income Statement For the Year Ended December 31, 20X2 Amount Percent $8,281,989 100.0% Net sales Less: Cost of goods sold (5,383,293) 65.0 Gross margin $2,898,696 35.0 Less: Operating expenses (1,323,368) 16.0 Operating income $1,575,328 19.0 Less: Interest expense (50,000) 0.6 Income before taxes $1,525,328 18.4 Less: Income taxes (40%)* (610,131) 7.4 Net income $915,197 11.0 *Includes both state and federal taxes.