Computing earnings per share and price/earnings ratioRocket 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’s books include the following figures:RequirementsCompute Rocket’s EPS for the year.Assume Rocket’s market price of a share of common stock is $12 per share. Compute Rocket’s price/earnings ratio. Preferred Stock-6%, $60 par value; 2,000 shares authorized, 1,000shares issued and outstanding$ 60,000Common Stock-$5 par value; 80,000 shares authorized, 48,000 sharesissued, 46,700 shares outstanding240,000470,000(26,000)Paid-In Capital in Excess of Par-CommonTreasury Stock-Common; 1,300 shares at cost

Preferred dividend = Face value of preferred stock x rate of dividend = $60,000*6% =$3,600

Answered: Preferred Stock-6%, $60 par value;…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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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’s books include the following figures:

Requirements

Compute Rocket’s EPS for the year.
Assume Rocket’s market price of a share of common stock is $12 per share. Compute Rocket’s price/earnings ratio.

Preferred Stock-6%, $60 par value; 2,000 shares authorized, 1,000
shares issued and outstanding
$ 60,000
Common Stock-$5 par value; 80,000 shares authorized, 48,000 shares
issued, 46,700 shares outstanding
240,000
470,000
(26,000)
Paid-In Capital in Excess of Par-Common
Treasury Stock-Common; 1,300 shares at cost

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