P13-45A Computing earnings per share, price/earnings ratio, and rate of Learning

ID: 2518902 • Letter: P

Question

P13-45A Computing earnings per share, price/earnings ratio, and rate of Learning Objective 7 return on common stockholders' equity Bianchi Company reported these figures for 2018 and 2017 2018 2017 Income Statement-partial Net Income $ 34,380 $ 18,000 Dec. 31, 2018 Dec. 31, 2017 Balance Sheet-partial Total Assets Paid-In Capital $ 285,000 $280,000 Preferred Stock-11%, $9 Par Value: 60,000 shares $108,000 $108,000 authorized, 12,000 shares issued and outstanding Common Stock-$2 Par Value; 60,000 shares 100,000 100,000 authorized, 50,000 shares issued and outstanding Paid-In Capital in Excess of Par-Common Retained Earnings Total Stockholders' Equity 14,000 60,500 $282,500 14,000 38,000 $260,000

Explanation / Answer

2018

net income

34380

less preferred dividend = 9*11%*12000

11880

net income available to common stock holders

22500

no of equity share

50000

EPS = net income available to common stock holders/no of common stock outstanding

22500/50000

0.45

price earnings ratio = market price/EPS

9/0.45

return on equity = net income available to common stockholders/average shareholders’ equity

22500/271250

8.29%

average equity = (opening balance + closing balance)/2

(282500+260000)/2

271250