Question Details

Compute the return on common stockholders’ equity 



1
The balance in retained earnings on January 1, 2014, for Hotel Plaza Inc., was $575,000. During the year, the corporation paid cash dividends of $70,000 and distributed a stock dividend of $15,000. In addition, the company determined that it had overstated its depreciation expense in prior years by $50,000.  Net income for 2014 was $120,000.

Instructions
Prepare the retained earnings statement for 2014.


2
The following information is available for Evans Corporation:

		2015			2014	
Average common stockholders’ equity	$1,500,000	$1,000,000
Average total stockholders’ equity	2,000,000	1,500,000
Common dividends declared and paid	72,000	50,000
Preferred dividends declared and paid	30,000	30,000
Net income	350,000	300,000

Instructions
Compute the return on common stockholders’ equity ratio for both years. Briefly comment on your findings.




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