The following information pertains to Parsons Co.: Preferred stock, cumulative:
ID: 2410798 • Letter: T
Question
The following information pertains to Parsons Co.:
Preferred stock, cumulative:
Par value per share $100
Dividend rate 8%
Shares outstanding 10,000
Dividends in arrears none
Common stock:
Par value per share $10
Shares issued 125,000
Dividends paid per share $2.10
Market price per share $47.50
Additional paid-in capital $510,000
Unappropriated retained earnings (after closing) $270,000
Retained earnings appropriated for contingencies $310,000
Common treasury stock:
Number of shares 10,000
Total cost $240,000
Net income $616,000
.
Compute (assume no changes in balances during the past year): (Round per share and ratios to 2 decimal places, e.g. $15.25 or 15.25%.)
.
I can't figure out why they are wrong. The rounding maybe.
a)Total amount of stockholders' equity in the balance sheet $3,100,000 correct b)Earnings per share of common stock $4.66 per share correct c)Book value per share of common stock $16.09 per share wrong d)Payout ratio of common stock 45.06% correct e)Return on common stock equity 28.97% wrongExplanation / Answer
(a)total amount of stockholders equity =
(No of shares*par value)+(shares issued*par value)+additional paid in capital+unappropriated retained earnings+appropriate retained earnings- total cost
=(10,000*100$)+(1,25,000*10$)+5,10,000+2,70,000+3,10,000 -2,40,000
=$31,00,000
(b)earnings per share=
Net income-(no.of shares*100*dividend rate)÷(shares issued-no of shares)
=616,000-(10,000*100*8%)÷(1,25,000-10,000)
=(616,000-80,000)÷1,15,000
=4.66$ per share
(c)book value per share=
(Total amount of stockholders equity- no. Of shares*100)÷(shares issued -no. Of shares)
=(31,00,000-10,000*100)÷(1,25,000-10,000)
=21,00,000÷1,15,000
=18.26$ per share
(d)payout ratio=
dividend paid per share*100÷ earnings per share
(2.10*100)÷4.66
45.06%
(e)Return on common stock equity=
(net income- dividend) ÷(total amount of stockholders equity- no of shares *100)
=(6,16,000-80,000)*100÷ (31,00,000-10,00,000)
=(5,36,000*100)÷21,00,000
=25.52%
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