I need help plz. The balance sheet for Bearing Industries Inc. at the end of the

Question

I need help plz. The balance sheet for Bearing Industries Inc. at the end of the current fiscal year indicated the following: Bonds payable, 10% (issued in 2002, due in 2022) $1,800,000 Preferred $10 stock, $50 par 88,500 Common stock, $5 par 398,250 Income before income tax was $396,000, and income taxes were $59,700, for the current year. Cash dividends paid on common stock during the current year totaled $89,208. The common stock was selling for $32 per share at the end of the year. Determine each of the following. Round answers to one decimal place, except for dollar amounts which should be rounded to the nearest whole cent. a. Number of times bond interest charges are earned: b. Number of times preferred dividends are earned: c. Earnings per share on common stock: $ d. Price-earnings ratio: e. Dividends per share of common stock: $ f. Dividend yield:

Explanation / Answer

Part (a):

Bond interest charges = 10% of issued bond value of $1,800,000 = 0.1 * 1,800,000 = $180,000

Net Income = Income (before tax) - Income Tax = $396,000 - $59,700 = $336,300

Number of times bond interest charges are earned = $336,300/$180,000 = 1.868 1.9

Part (b):

$10 dividends paid on 88,500 preferred stock

Total Dividend payout on Preferred stock = 88,500 * 10 = $885,000

Number of times preferred dividends are earned = $336,300/$885,000 = 0.38 0.4

Part (c):

Common stock: 398,250 shares, Price of common stock = $32 at the end of the year

Earnings per share on Common stock = Net Income/ # of common stock = $336,300/398,250 = $0.844 $0.84

Part (d):

Price of common stock = $32 (par value)

Price -to - Earnings ratio, P/E = $32/$0.84 = 37.89 37.9

Part (e):

Total cash dividend paid on common stock = $89,208

Common stock: 398,250 shares

Therefore, Dividends per share of common stock = Total Dividend/ # of common stock = $89,208/398,250 = $0.224 $0.22

Part (f):

Dividend Yield = Dividend per share (of common stock)/Common stock price per share = $0.22/$32 = 0.007 = 0.7%

Answers: (a) 1.9 (b) 0.4 (c) $0.84 (d) 37.9 (e) $0.22 (f) 0.7%

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