Shown below is the liabilities and stockholders’ equity section of the balance s
ID: 2417993 • Letter: S
Question
Shown below is the liabilities and stockholders’ equity section of the balance sheet for Jana Kingston Company and Mary Ann Benson Company. Each has assets totaling $4,426,100.
Jana Kingston Co.
Mary Ann Benson Co.
For the year, each company has earned the same income before interest and taxes.
Jana Kingston Co.
Mary Ann Benson Co.
At year end, the market price of Kingston’s stock was $101 per share, and Benson’s was $63.50. Assume balance sheet amounts are representative for the entire year.
(a) Calculate the return on total assets? (Round answers to 2 decimal places, e.g. 16.85%.)
Return on total assets
Return on common stock
equity
Net income per share
Book value per share
Jana Kingston Co.
Mary Ann Benson Co.
Current liabilities $313,700 Current liabilities $735,700 Long-term debt, 10% 1,211,000 Common stock ($20 par) 2,980,000 Common stock ($20 par) 2,191,000 Retained earnings (Cash dividends, $328,900) 710,400 Retained earnings (Cash dividends, $222,000) 710,400 $4,426,100 $4,426,100Explanation / Answer
a) return on total assets = net income / total assets
Jana kingston company Marry Aan benson company
Net income $596,695 $663,300
Total assets $4,426,100 $4,426,100
Return on total assets 13.48% 14.99%
Marry Aan benson company is more profitable.
b) return of common stock equity = net income / shareholders equity
Jana kingston company Marry Aan benson company
Common stock 2,191,000 2,980,000
Retained earnings 710,400 710,400
Share holders equity 2,901,400 3,690,400
net income 596,695 663,300
return on common stock equity 20.57% 17.97%
Jana kingston company is more profitable
c) net income per share = net income / number of shares
number of shares = total common stock value/ par value per share
Jana kingston company Marry Aan benson company
Total common stock value 2,191,000 2,980,000
Par value of share 20 20
Number of shares 109,550 149,000
Net income 596,695 663,300
net income per share 5.45 4.45
Jana kingston company has more net income per share
e) book value per share = total shareholders equity - preferred equity / outstanding shares
Jana kingston company Marry Aan benson company
Share holders equity 2,901,400 3,690,400
Number of shares 109,550 149,000
Book value per share 26.48 24.77
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