Quantitative Reasoning Problem 2 ACC 122 Assignment is to be

Quantitative Reasoning Problem 2

ACC 122

Assignment is to be completed as a Word Document, PDF, or on notebook paper and submitted through Moodle

The table below contains letters a, b, c, d.

2018

2017

Average common stockholder equity

$1,800,000

$1,900,000

Dividends paid to common shareholders

90,000

70,000

Dividends paid to preferred shareholders

20,000

20,000

Net Income

290,000

248,000

Market Price of common stock

$20

$25

Weighted average number of shares common stock outstanding

150,000

180,000

Earnings per share

(a)

(b)

Return on common stockholders equity

(c)

(d)

Tell what these formulas are used for : Earnings per share; Return on common stockholder equity

Show all your computations or calculations for each of the letters (a), (b), (c ) (d)

Provide a sentence of explanation for each answer telling why you did what you did

	2018	2017
Average common stockholder equity	$1,800,000	$1,900,000
Dividends paid to common shareholders	90,000	70,000
Dividends paid to preferred shareholders	20,000	20,000
Net Income	290,000	248,000
Market Price of common stock	$20	$25
Weighted average number of shares common stock outstanding	150,000	180,000
Earnings per share	(a)	(b)
Return on common stockholders equity	(c)	(d)

Solution

Req a and b 2018 2017 Net Income 290000 248000 Less: Prefered dividend 20000 20000 Net Income for common Stockholder 270000 228000 Divide: Average Number of Shares 150000 180000 Earning per share 1.8 1.27 Earnings per share the income earned per common share by the business Thus preferred dividend paid is deducted from net income to find the net income for common Stockholders. Req c and d: 2018 2017 Net Income 290000 248000 Less: Prefered dividend 20000 20000 Net Income for common Stockholder 270000 228000 Divide: Average common Equity 1,800,000 1900000 Return on Common Equity 15% 12% Here, instead of computing per share basis, the percentagge of return earned is computed.