During 2016, Linda, Inc.’s net income was $1,400,000. Its common stockholders’ equity was $2,160,000 at January...
During 2016, Linda, Inc.’s net income was $1,400,000. Its common
stockholders’ equity was $2,160,000 at January 1, 2016 and
$3,440,000 at December 31, 2016. During 2016, Cooper had 10,000
outstanding shares of 6%, $300 par value cumulative preferred
stock. During December, 2016, Linda’s board of directors declared
the annual preferred stock dividend and a $240,000 common stock
dividend.
What is Linda’s 2016 return on common stockholders’ equity?
Select one:
A. 50.0%
B. 41.4%
C. 43.6%
D. 35.0%
Homework Answers
Return on common stockholders equity =
( net income) - (preference dividend ) / average common stock equity
Average common stock equity =( 2160000+3440000 ) / 2
= 2800000
Preference dividend =( 300*10000)*6% = 180000
Return on common stock holders equity =
((1400000 - 180000)/ 2800000 )*100
= 43.5714
= 43.6 %
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shares issued)
$180,000
Common stock, $5 par (93,000 shares authorized, 18,600 shares
issued)
93,000
Additional paid-in capital
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Retained earnings
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Paid the annual 2016 $10 per share dividend on preferred stock
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Additional paid-in capital
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Retained earnings
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1.
Paid the annual 2016 $10 per share dividend on preferred stock
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Paid the annual 2016 $10 per share dividend on preferred stock
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