ABC Co. has average shareholders' equity of 1,000,000, which includes $200,000 par value of 12% preference shares... If the return on ordinary shareholder's equity during the year was 10%, net income must be A. $80,000 C. P104,000 B. 100,000 D. 124,000 E. answer not given

ABC Co. has average shareholders' equity of 1,000,000, which includes $200,000 par value of 12% preference shares... If the return on ordinary shareholder's equity during the year was 10%, net income must be A. $80,000 C. P104,000 B. 100,000 D. 124,000 E. answer not given

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 38MCQ

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Question

ABC Co. has average shareholders' equity of 1,000,000,
which includes $200,000 par value of 12% preference shares.
If the return on ordinary shareholder's equity during the year
was 10%, net income must be
A. $80,000 C. #104,000 E. answer not given
D. #124,000
B. 100,000

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Step 1: Computation of the total ordinary stockhodler's equity:

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Step 2: Computation of the net income during the period:

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