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Chapter 13: Q37E_1 (page 717)

Computing earnings per share and price/earnings ratio

Rocket Corp. earned net income of \(153,040 and paid the minimum dividend to preferred stockholders for 2018. Assume that there are no changes in common shares outstanding during 2018. Rocket鈥檚 books include the following figures:

Preferred Stock鈥�6%, \)60 par value; 2,000 shares authorized, 1,000

shares issued and outstanding \( 60,000

Common Stock鈥擻)5 par value; 80,000 shares authorized, 48,000 shares

issued, 46,700 shares outstanding 240,000

Paid-In Capital in Excess of Par鈥擟ommon 470,000

Treasury Stock鈥擟ommon; 1,300 shares at cost (26,000)

Requirements

1. Compute Rocket鈥檚 EPS for the year.

Short Answer

Expert verified

Earnings per share of the company is $3.16

Step by step solution

01

Basic Introduction-

Net income: $153,040

PreferredDividend=NumberofShares脳ValuePerShare脳DividendRate=1,000脳$60脳6%=$3,600

WeightedAverageNumberofEquitySharesOutstanding=NumberofStocksatBegining+NumberofStocksatBegining-TreasuryStock2=46,700+46,700-1,3002=46,050

02

Computation of Earnings Per Share-

Earnings per share

Net income

$153,040

Preferred dividend

($3,600)

a.

$149,440

b. weighted average number of equity share outstanding

$46,050

Earnings per share (a/b)

$3.25

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Most popular questions from this chapter

Analyzing the effect of prior-period adjustments

Taylor Corporation discovered in 2019 that it had incorrectly recorded in 2018 a cash payment of \(70,000 for utilities expense. The correct amount of the utilities expense was \)35,000.

Requirements

1. Determine the effect of the error on the accounting equation in 2018.

Question: Dividing cash dividends between preferred and common stock

Copperhead Trust has the following classes of stock:

Preferred Stock鈥�6%, \(12 par value; 8,500 shares authorized, 7,000 shares issued and outstanding

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Southern Amusements Corporation had the following stockholders鈥� equity on

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