Cooney Inc. reported net income of $540000 during 2017 and paid dividends of $52000 on common stock. It also has 20000 shares of 6% $100 par value preferred stock outstanding. Common stockholders' equity was $2400000 on January 1 2017 and $3200000 on December 31 2017. The company's return on common stockholders' equity for 2017 is:

Question

Quizplus · Accepted Answer

First, we need to calcuate net income available to common stockholders by subtracting preferred dividends from the net income:
Net income available to common stockholders = Net income - Preferred dividends
Net income available to common stockholders = $540,000 - ($20,000 x 0.06 x $100) = $528,000

Next, we need to calculate the average common stockholders' equity for the year:
Average common stockholders' equity = (Beginning common stockholders' equity + Ending common stockholders' equity) / 2
Average common stockholders' equity = ($2,400,000 + $3,200,000) / 2 = $2,800,000

Finally, we can calculate the return on common stockholders' equity for the year:
Return on common stockholders' equity = Net income available to common stockholders / Average common stockholders' equity
Return on common stockholders' equity = $528,000 / $2,800,000 = 0.15 or 15.0%

Therefore, the answer is B) 15.0%.