Use this information for Kellman Company to answer the question that follow.The balance sheets at the end of each of the first 2 years of operations indicate the following:Kellman Company Year 2Year 1Total current assets$621,800$562,300Total investments65,90045,600Total property, plant, and equipment884,500665,500Total current liabilities106,30087,000Total long-term liabilities290,900238,000Preferred 9% stock, $100 par95,80095,800Common stock, $10 par542,200542,200Paid-in capital in excess of par—Common stock67,20067,200Retained earnings469,800243,200Using the balance sheets for Kellman Company, if net income is $100,300 and interest expense is $39,400 for Year 2, and the market price of common shares is $50, what is the price-earnings ratio on common stock for Year 2? (Round intermediate calculation and final answer to two decimal places.)

Price-earnings ratio = Market price/Earnings per share Earnings per share = (Net income - Preferred dividend)/Common stock outstanding First compute preferred dividend as shown below: Annual preferred dividend = 95,800*9%Annual preferred dividend = $8,622 Common stock outstanding = $542,200/$10 Common stock outstanding = 54,220 Earnings per share = (Net income - Preferred dividend)/Common stock outstanding Earnings per share = ($100,300 - $8,622)/54,220 Earnings per share = $91,678/54,220 Earnings per share = $1.69 Price-earnings ratio = Market price/Earnings per share Price-earnings ratio = $50/$1.69 Price-earnings ratio = 29.59

Answered: Use this information for Kellman…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Use this information for Kellman Company to answer the question that follow.

The balance sheets at the end of each of the first 2 years of operations indicate the following:

Kellman Company
	Year 2	Year 1
Total current assets	$621,800	$562,300
Total investments	65,900	45,600
Total property, plant, and equipment	884,500	665,500
Total current liabilities	106,300	87,000
Total long-term liabilities	290,900	238,000
Preferred 9% stock, $100 par	95,800	95,800
Common stock, $10 par	542,200	542,200
Paid-in capital in excess of par—Common stock	67,200	67,200
Retained earnings	469,800	243,200

Using the balance sheets for Kellman Company, if net income is $100,300 and interest expense is $39,400 for Year 2, and the market price of common shares is $50, what is the price-earnings ratio on common stock for Year 2? (Round intermediate calculation and final answer to two decimal places.)

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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