Caston Company Had Net Income of $5,000,000 for the Year $31,2 \times 10$

question 8

Essay

Caston Company had net income of $5,000,000 for the year ended December 31,2X10.The stockholders' equity section of the Caston Company at December 31,2X10 and 20X9,is as follows:
Caston Company
Stockholders' Equity Section of the Balance Sheet December $31,2 \times 10$ and $20 \times 9$ $12/31/ 2\times 10$$\quad$$\quad$$12/31/2 \times 09$ 11% Preferred stock,$100 par,
$\text { noncuimulative, } 75,000 \text { shares authorized; }$

$\text {20,000 sharesissued and outstanding}$ $\quad$$\quad$$\quad$$\quad$$\quad$$\$ 2,000,000$$\quad$$\quad$$\quad$$\quad$$\$ 2,000,000$ Common stock,$1.25 par,4,000,000 shares
$\begin{array}{lcll}\text { authorized; } 1,100,000 \text { and } 1,050,000 \text { shares }\\\quad \text { issued } & 1,375,000 & 1,312,500 \\\text { Additional paid-in capital-preferred } & 100,000 & 100,000 \\\text { Additional paid-in capital-common } & 15,200,000 & 14,437,500\\\text { Total paid-in capital } & \$ 18,675,000 & \$ 17,850,000 \\\text { Retained earnings } & 17,900,000& 14,600,000\\\text { Total paid-in capital and retained earnings }&\$ 36,575,000&\$ 32,450,000\end{array}$ Treasury stock,12,000 and 10,000
$\begin{array}{ccc}\text { shares of common stock } & (180,000)& (150,000)\\\text { Total stockholders' equity } & \$ 36,395,000&\$ 32,300,000\end{array}$ Determine
a.the book value per share of common stock at the end of 2X10.
b.the rate of return on common equity for 2X10.
c.the amount of cash dividends on common stock declared during 2X10.

---

Definitions:

UCC

The Uniform Commercial Code is an extensive collection of statutes that regulates commercial dealings in the United States, covering areas such as sales, negotiable instruments, and secured transactions.

Risk

A potential loss.

Perfect Tender Rule

This rule allows buyers to reject goods that do not precisely meet the quality, quantity, and delivery terms specified in the contract.

Minor Flaws

Small defects or imperfections that do not significantly affect the overall functionality or value of an item.