North Company Reports the Following Amounts for 2017 The 2017 Rate of Return on Common Stockholders' Equity Is

question 87

Multiple Choice

North Company reports the following amounts for 2017: $$\begin{array} { l r } \text { Net income } & 160,000 \\\text { Average stockholders' equity } & 2,000,000 \\\text { Preferred dividends } & 45,000 \\\text { Parvalue preferred stock } & 250,000\end{array}$$ The 2017 rate of return on common stockholders' equity is:

• A) 5.8%.
• B) 6.6%.
• C) 8.0%.
• D) 9.1%.

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Definitions:

Gross Profit

The financial gain obtained after deducting the cost of goods sold from total sales revenue.

Intra-entity Inventory

Inventory transactions occurring between divisions or subsidiaries within the same parent company, which may need elimination during consolidation.

Goodwill

The excess of the purchase price of a business over the fair market value of its identifiable assets and liabilities, recognized as an intangible asset on the balance sheet.

Equity Method

An accounting technique used to record an investor's proportional share of an associate company's net income or loss on its financial statements.