Question

1. Given the following information the correct rate of Return on Common Stockholders Equity would be,   Net Income $74,800, Beginning and Ending Total Stockholders’ Equity $297,000 and $323,000, Common stock dividends $10,000, Preferred stock Dividends $2,000, Total Preferred Stock, beginning $27,000 and ending 33,000

A. .32 or 32%

B. $2.60 per share

C. .26 or 26%

D. Can’t be determined from the information given

2)      Using the correct information calculate the net cash activity for the Operating Activities Section of the Cash flow statement. Increase in Cash $7,000, Net Income 48,700, purchase of equipment with the issuance of Common Stock $10,000, Loss on sale of Furniture $1,900, Reduction of Accounts Payable $11,000, Depreciation Expense $7,700 and increase in Salaries Payable $4,900, Increase in Inventory $6,200 and decrease in Accounts Receivable $2,200

A. Net cash flow of $48,200

B. Net cash flow of $46,300

C. Net cash flow of $68,400

D. Net cash flow of $44,400

3. Increase in Long Term Notes Payable would be a

A. Source of cash included in the Investing Activities section

B. Use of cash included in the investing Activities section

C. Source of cash included in the Financing Activities section

D. Use of cash included in the Financing Activities Section

Answer 1

Answer:-1)-

Return on common stockholder’s equity = Net income-Preferred dividend/Average common stockholder’s equity

= {($74800-$2000)/($297000+$323000)/2*100

=($72800/$310000)*100 =23.48%

2)-

Statement of Cash Flow (Using Indirect Method)
For the year ended
Particulars		Amount
		$
Cash flow from opreating activities
Net Income		48700
Adjustments to reconcile net income to net cash provided by opreating activities
Adjustment for non cash effects
Loss on sale of furniture		1900
Depreciation		7700
Change in opreating assets & liabilities
Decrease in accounts receiveble		2200
Increase in inventory		-6200
Decrease in accounts payable		-11000
Increase in salaries payable		4900
Net cash flow from opreating activities (a)		48200

3)- Increase in Long Term Notes Payable would be a:- Source of cash included in the Financing Activities section.