16BP Elite Trailer Parks has an opera... [FREE SOLUTION]

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Foundations Of Financial Management

Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen

Business Studies

16th Edition 路 768 pages

ISBN: 9781259277160

Chapter 2: 16BP (page 51)

Elite Trailer Parks has an operating profit of $200,000. Interest expense for the year was $10,000; preferred dividends paid were $18,750; and common dividends paid were $30,000. The tax was $61,250. The firm has 20,000 shares of common stock outstanding.
a. Calculate the earnings per share and the common dividends per share for
Elite Trailer Parks.
b. What was the increase in retained earnings for the year?

Short Answer

Expert verified

a. The earnings per share and dividends per share are $5.5 and $1.5 respectively.

b. The increment in retained earnings is $80,000.

Step by step solution

Calculation of earning available for equity shareholders

$E a r n i n g a v a i l a b l e f o r s h a r e h o l d e r s = O p e r a t i n g p r o f i t - I n t e r e s t e x p e n s e - T a x - P r e f f e r e d d i v i d e n d = $ 200, 000 - $ 10, 000 - $ 61, 250 - $ 18, 750 = $ 110, 000$

Calculation of earning per share

$E P S = \frac{E a r n i n g s a v a i l a b l e f o r s h a r e h o l d e r s}{N o . o f s h a r e s o u t s \tan d i n g} = \frac{$ 110.000}{20, 000} = $ 5.5$

Calculation dividend per share

$D P S = \frac{E q u i t y d i v i d e n d}{N o . o f s h a r e s o u t s \tan d i n g} = \frac{$ 30, 000}{20, 000} = $ 1.5$

Increment in the retained earnings

$I n c r e m e n t i n t h e r e t a i n e d e a r n i n g s = E a r n i n g s a v a i l a b l e f o r s h a r e h o l d e r - D i v i d e n d P a i d = $ 110, 000 - $ 30, 000 = $ 80, 000$

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	Allstate trucking	Industry
Return on sales	3%	8%
Return on assets	15%	10%

Retained earning	Bond payable
Accounts payable	Accrued wages payable
Prepaid expenses	Accounts receivable
Plant and equipment	Capital in excess of par
Inventory	Preferred stock
Common stock	Marketable security

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Short Answer

Step by step solution

Calculation of earning available for equity shareholders

Calculation of earning per share

Calculation dividend per share

Increment in the retained earnings

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