Question

On December​ 31, Mercury Corporation has the following data​available: Net Income ​$200,000 Interest expense ​20,000 Preferred dividends ​20,000 Total assets at the beginning of the year​850,000 Total assets at the end of the year ​780,000 Total common​stockholders' equity at the beginning of the year ​550,000 Total common​ stockholders' equity at the end of the year ​490,000 What is return on common​ equity?A 42.31%B 38.46%C 22.09%D 34.62%

Answer 1

D 34.62%

Step-by-step explanation:

To get the return on commonequity we need to follow a few steps as follows:

Here we have to let the Average total common stockholders' equity = ($550,000 + $490,000) ÷ 2 = $520,000 and (Net income $200,000 - Preferred Dividends $20,000) ÷ Average total common stockholders' equity = 34.62% .Therefore the correct answer is 34.62%.