On January 1, 2011, Sienna Corporation purchased 2,000 shares of treasury stock. Other information regarding Siena Corporation is provided below.
|
2010 |
2011 |
|
|
Net income |
$110,000 |
$110,000 |
|
Dividends on preferred stock |
$10,000 |
$10,000 |
|
Dividends on common stock |
$2,000 |
$1,600 |
|
Weighted average number of shares outstanding |
10,000 |
8,000* |
|
Common stockholders’ equity, beginning of year |
$500,000 |
$400,000* |
|
Common stockholders’ equity, end of year |
$500,000 |
$400,000 |
*Adjusted for purchase of treasury stock.
Compute (a) return on common stockholders’ equity for each year and (b) discuss the changes.