Chapter 8 practice problems

Problem 8

Solvency

k Exercise 11-19A (Algo) Using the P/E ratio LO 11-9 Lake Incorporated and River Incorporated reported net incomes of $164,000 and $124,000, respectively, for the most recent fiscal year. Both companies had 40,000 shares of common stock issued and outstanding. The market price per share of Lake's stock was $57, while River's sold for $61 per share. Required a. Determine the P/E ratio for each company. b. Based on the P/E ratios computed in Requirement a, which company do investors believe has the greater potential for growth in income? Complete this question by entering your answers in the tabs below. Required A Required B Determine the P/E ratio for each company. Note: Do not round intermediate calculations. Round your answers to the nearest whole number. Company Lake, Incorporated River, Incorporated P/E Ratio

PROBLEM 8-5 Disaggregating and Analyzing Return on Common Equity CHECK (a) Yr. 5 RNOA = 10.0% Selected financial statement data from Texas Telecom, Inc., for Years 5 and 9 are reproduced below ($ millions): Income Statement Data Revenues.. Operating income. Interest expense.. Pretax income Income taxes Net income. Balance Sheet Data Long-term operating assets. Working capital.. Total liabilities... Total shareholders' equity. Year 5 $542 35 7 28 14 14 $ 52 123 50 125 Year 9 $979 68 0 68 34 34 $63 157 0 220 3 Required: a. Calculate return on common equity and disaggregate ROCE for Years 5 and 9 using end-of-year values for com- putations requiring an average (assume fixed assets and working capital are operating and a 50% tax rate). b. Comment on Texas Telecom's use of financial leverage.

Exercise 15-14 (Algo) Accounting for equity method investments LO P5 Listed below are a few events and transactions of Kodax Company. Year 1 January 2 Purchased 67,000 shares of Grecco Company common stock for $576,000 cash. Grecco has 201,000 shares of common stock outstanding, and its activities will be significantly influenced by Kodax. September 1 Grecco declared and paid a cash dividend of $1.00 per share. December 31 Grecco announced that net income for the year is $515,400. Year 2 June 1 Grecco declared and paid a cash dividend of $1.50 per share. December 31 Grecco announced that net income for the year is $747,900. December 31 Kodax sold 14,000 shares of Grecco for $180,eee cash. Prepare journal entries to record the above transactions and events of Kodax Company. Note: Do not round intermediate calculations and round your final answers to the nearest dollar amount. View transaction list No 1 2 View journal entry worksheet Date January 2, Year 1 Equity method investments Cash…

Exercise 9-12A (Algo) Ratio analysis LO 9-5 During Year 3, Baird Corporation reported after-tax net income of $3,640,000. During the year, the number of shares of stock outstanding remained constant at 9,580 of $100 par, 8 percent preferred stock and 400,000 shares of common stock. The company's total stockholders' equity is $19,800,000 at December 31, Year 3. Baird Corporation's common stock was selling at $53 per share at the end of its fiscal year. All dividends for the year have been paid, including $4.70 per share to common stockholders. Required a. Compute the earnings per share. (Round your answer to 2 decimal places.) b. Compute the book value per share of common stock. (Round your answeryto 2 decimal places.) c. Compute the price-earnings ratio. (Round intermediate calculations and final answer to 2 decimal places.) d. Compute the dividend yield. (Round your percentage answer to 2 decimal places. (i.e., 0.2345 should be entered as 23.45).) a. Earnings per share b. Book value…

answer question 4,5,6 and 7  with formula

Question 4 of 5 View Policies Show Attempt History Current Attempt in Progress Dividends declared: Retained earnings at the beginning of the year On preferred stock-$6.00 per share On common stock-$1.75 per share Retained earnings at the end of the year Net Income /(Loss) BLOSSOM INC. Income Statement For the Year Ended December 31 Income from Continuing Operations Loss from Discontinued Operations $276,000 14,850,000 eTextbook and Media $ Note 1. During the year, Blossom Inc. suffered a major loss from discontinued operations of $1,325,200 after applicable income tax reduction of $1,190,000. $15,018,850 At the end of the current year, Blossom Inc. has outstanding 8,530,000 shares of $10 par common stock and 46,000 shares of 6% preferred. On April 1 of the current year, Blossom Inc. issued 990,000 shares of common stock for $33 per share to help finance the loss from discontinued operations. 1.45 1,325,200 Compute the earnings per share on common stock for the current year as it…

Exercise 15-20 Presented below is information from the annual report of Emporia Plastics, Inc. Operating income   $532,150 Bond interest expense   135,000     397,150 Income taxes   183,432 Net income   $213,718       Bonds payable   $1,000,000 Common stock   875,000 Retained earnings   375,000 (a) Compute the return on common stockholders’ equity and the rate of interest paid on bonds. (Assume balances for debt and equity accounts approximate averages for the year.) (Round answers to 1 decimal place, e.g. 16.8%.) Rate of return on common stock equity     % Rate of interest paid on bonds payable     % (b) Is Emporia Plastics, Inc. trading on the equity successfully? Yes or No