The following information pertains to Unique Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. $\begin{array}{lr}\text { Income Statement }\
\text { Sales revenue } & \$ 85,000 \
\text { Cost of goods sold } & 45,000 \
\text { Gross profit } & 40,000 \
\text { Operating expenses } & 20,000 \
\text { Net income } & \$ 20,000\\\text { Number of shares of common stock } & 6,000 \
\text { Market price of common stock } & \$ 20 \
\text { Dividends per share on common stock } & 0.90 \
\text { Cash provided by operations } & \$ 30,000
\end{array}$ What is the return on common stockholders' equity for this company?

Question

Quizplus · Accepted Answer

Return on common stockholders' equity = Net income / Average common stockholders' equityAverage common stockholders' equity = (Beginning common stockholders' equity + Ending common stockholders' equity) / 2Beginning common stockholders' equity = Common stock + Retained earningsEnding common stockholders' equity = Common stock + Retained earnings + Net income - DividendsCommon stock = Number of shares of common stock * Market price of common stockRetained earnings = Beginning retained earnings + Net income - DividendsDividends = Dividends per share * Number of shares of common stockTherefore,Average common stockholders' equity = [(6,000 * $20) + (6,000 * $20 + $20,000 - (0.90 * 6,000))] / 2= [(120,000) + (144,000)] / 2= $132,000Return on common stockholders' equity = $20,000 / $132,000= 15.15%Therefore, the correct answer is A.

The Following Information Pertains to Unique Company What Is the Return on Common Stockholders' Equity for This