Caston Company had net income of $5,000,000 for the year ended December 31, 2016
ID: 2601013 • Letter: C
Question
Caston Company had net income of $5,000,000 for the year ended December 31, 2016 along with the following data: Cash $500,000 11% Preferred stock, $100 par, noncumulative, 75,000 shares authorized; 20,000 shares issued and outstanding $ 2,000,000 Common stock, $1.25 par, 4,000,000 shares authorized; 1,100,000 and 1,050,000 shares issued $1,375,000 Additional paid-in capital-preferred $100,000 Accounts payable $200,000 Additional paid-in capital-common $15,200,000 Short term investment $10,000,000 Retained earnings $17,900,000 Treasury stock, 12,000 shares of common stock $180,000 Tax Payable $200,000 Requirements: a. Prepare shareholders’ Equities section of the balance sheet. b. Compute ROE for 2016.
Explanation / Answer
a)
Preferred Stock, $100 par, noncumulative, 20000 shares issued and outstanding
2000000
Common stock, $1.25 par, 4,000,000 shares authorized; 1,100,000 and 1,050,000 shares issued
1375000
Additional paid-in capital-preferred
100000
Additional paid-in capital-common
15,200,000
Retained Earnings
17,900,000
Total Contributed Capital
36575000
Treasury stock
(180000)
Total Stockholders’ Equity
36,395,000
b)
ROE for 2016 = Net income/Total Stockholders’ equity
= (5000000/36395000) * 100
= 13.738%
Preferred Stock, $100 par, noncumulative, 20000 shares issued and outstanding
2000000
Common stock, $1.25 par, 4,000,000 shares authorized; 1,100,000 and 1,050,000 shares issued
1375000
Additional paid-in capital-preferred
100000
Additional paid-in capital-common
15,200,000
Retained Earnings
17,900,000
Total Contributed Capital
36575000
Treasury stock
(180000)
Total Stockholders’ Equity
36,395,000
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