Raiders Limited is a private company that follows ASPE. It is authorized to issue an unlimited number of both common and $5 cumulative preferred shares. On December 31, 2014, there were 35,000 common and 1,000 preferred shares issued. The common shares had been issued at an average cost of $10 per share; the preferred shares at $105. The balance in the Retained Earnings account on January 1, 2014, was $287,000. During 2014, the company had profit of $125,000 and declared a total of $75,000 of dividends, of which $56,250 was paid during the year.
Instructions
(a) Prepare the shareholders' equity section of the balance sheet on December 31, 2014.
(b) Calculate return on equity for 2014. Assume there were no changes in the Common Shares account during the year.