King Corporation Had Net Income of $260,000 and Paid Dividends

question 238

Multiple Choice

King Corporation had net income of $260,000 and paid dividends of $40,000 to common stockholders and $10,000 to preferred stockholders in 2015. King Corporation's common stockholders' equity at the beginning and end of 2015 was $870,000 and $1,130,000, respectively. There are 100,000 weighted-average shares of common stock outstanding. King Corporation's return on common stockholders' equity was

• A)18.6%.
• B)25%.
• C)21%.
• D)22.1%.

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Definitions:

Partnership Basis

The amount invested in a partnership by the partners, used to determine gain or loss upon withdrawal or dissolution of the partnership.

Section 179 Expense

A U.S. tax code provision allowing businesses to deduct the full purchase price of qualifying equipment or software within a tax year instead of capitalizing and depreciating it over time.

Raul's Basis

This term is not a standard-tax related term or widely recognized financial concept. Likely refers to the basis of an investment or asset specific to an individual named Raul, which generally means the cost of the asset for tax purposes.

Capital Asset

Property owned for investment or personal use, excluding inventory or assets sold as part of a business's regular operations.