Herman Corporation Had Net Income of $100,000 and Paid Dividends

question 114

Multiple Choice

Herman Corporation had net income of $100,000 and paid dividends of $25,000 to common stockholders and $20,000 to preferred stockholders in 2017. Herman Corporation's common stockholders' equity at the beginning and end of 2017s was $450,000 and $550,000, respectively. Herman Corporation's return on common stockholders' equity is

• A)20.0%.
• B)16.0%.
• C)15.0%.
• D)11.0%.

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Definitions:

Federal Estate

The estate of a deceased person that is subject to Federal estate taxes, which are taxes imposed on the transfer of the decedent's assets.

Abatement

The reduction, decrease, or relief from severity, intensity, or intensity of something, often used in the context of tax, rent, or environmental hazards.

Ademption

The situation in wills and estates where a specific bequest cannot be distributed because the item no longer exists in the decedent's estate.

Legacies

Gifts or inheritances left to someone in a will.