Fundamentals Of Financial Accounting
6th Edition
ISBN: 9781259864230
Author: PHILLIPS, Fred, Libby, Robert, Patricia A.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 11, Problem 13ME
Calculating and Interpreting Earnings per Share (EPS) and Return on Equity (ROE)
Academy Driving School reported the following amounts in its financial statements:
| Year 1 | Year 2 | |
| Number of common shares | 11,500 | 11,500 |
| Net income | $ 18,000 | $ 23,000 |
| Cash dividends paid on common stock | $ 3,000 | $ 3,000 |
| Total |
$220,000 | $240,000 |
Calculate EPS and ROE for Year 2. Another driving school in the same city reported a higher net income ($45,000), yet its EPS and ROE ratios were lower than those for the Academy Driving School. Explain how this apparent inconsistency could occur.
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Academy Driving School reported the following amounts in its financial statements:
Year 1
Year 2
Number of common shares
11,600
11,600
Net income
$ 24,360
$ 19,360
Cash dividends paid on common stock
$ 3,100
$ 3,100
Total stockholders' equity
$ 250,000
$ 230,000
Calculate EPS and ROE for Year 2. (Round EPS to 2 decimal places and ROE to 1 decimal place.)
Using Excel to Calculate Equity Balances
PROBLEM
Pasta Creations issued additional shares of common shares,
reported net income, and declared dividends during the
year. Information concerning its equity is provided here.
Beginning of year common shares
Beginning of year retained earnings
Additional common shares issued
Net income reported
Dividends declared
$ 98,000
476,000
52,000
78,000
16,000
Student Work Area
Required: Provide input into cells shaded in yellow in this
template. Input the required mathematical formulas or functions
with cell references to the Problem area or work area as
a. Calculate the ending balances of (1) common shares, (2)
retained earnings, and (3) total shareholders' equity.
Common shares
Retained earnings
Total shareholders' equity
b. Calculate the same amounts if the company had reported a
net loss rather than net income and had not declared any
dividends.
Net loss amount
Common shares
Retained earnings
Total shareholders' equity
$
72,000
Statement of stockholders' equity
Climate Control Systems Co. offers its services to residents in the Spokane area. Selected accounts from the ledger of Climate Control Systems for the
fiscal year ended December 31, 20Y2, are as follows:
Common Stock
Jan. 1
75,000
Feb. 15
25,000
Retained Earnings
Dividends
Dec. 31
160,000 Jan. 1 (20Y2)
4,150,800
Mar. 31
40,000 Dec. 31
160,000
Dec. 31
700,000
June 30
40,000
Sept. 30
40,000
Dec. 31
40,000
Prepare a statement of stockholders' equity for the year ended December 31, 20Y2. If a net loss is incurred or dividends were paid, enter that amount
as a negative number using a minus sign.
Chapter 11 Solutions
Fundamentals Of Financial Accounting
Ch. 11 - Prob. 1QCh. 11 - Prob. 2QCh. 11 - Prob. 3QCh. 11 - Explain each of the following terms: (a)...Ch. 11 - What are the differences between common stock and...Ch. 11 - What is the distinction between par value and...Ch. 11 - What are the usual characteristics of preferred...Ch. 11 - What items are included in Accumulated Other...Ch. 11 - What is treasury stock? Why do corporations...Ch. 11 - How is treasury stock reported on the balance...
Ch. 11 - What are the two financial requirements to support...Ch. 11 - What is the difference between cumulative and...Ch. 11 - What is a stock dividend? How does a stock...Ch. 11 - What are the primary reasons for issuing a stock...Ch. 11 - Your company has been very profitable and expects...Ch. 11 - Identify and explain four important dates with...Ch. 11 - Prob. 17QCh. 11 - How do stock repurchases affect the EPS and ROE...Ch. 11 - What is one interpretation of a high P/E ratio?Ch. 11 - Prob. 20QCh. 11 - Which feature is not applicable to common stock...Ch. 11 - Which statement regarding treasury stock is false?...Ch. 11 - Which of the following statements about stock...Ch. 11 - Which of the following is ordered from the largest...Ch. 11 - Prob. 5MCCh. 11 - A journal entry is not recorded on what date? a....Ch. 11 - Prob. 7MCCh. 11 - Prob. 8MCCh. 11 - Prob. 9MCCh. 11 - Prob. 10MCCh. 11 - Equity versus Debt Financing Indicate whether each...Ch. 11 - Computing the Number of Issued Shares Face 2 Face...Ch. 11 - Computing the Number of Unissued Shares The...Ch. 11 - Analyzing and Recording the Issuance of Common...Ch. 11 - Analyzing and Recording the Issuance of No-Par...Ch. 11 - Determining the Effects of Stock Issuance and...Ch. 11 - Determining the Amount of a Dividend Netpass...Ch. 11 - Recording Dividends On May 20, the board of...Ch. 11 - Determining the Impact of a Stock Dividend Sturdy...Ch. 11 - Determining the Impact of a Stock Split Complete...Ch. 11 - Determining the Amount of a Preferred Dividend...Ch. 11 - Determining the Amount of a Preferred Dividend...Ch. 11 - Calculating and Interpreting Earnings per Share...Ch. 11 - Inferring Financial Information Using the P/E...Ch. 11 - (Supplement 11A) Comparing Owner's Equity to...Ch. 11 - (Supplement 11B) Recording a Stock Dividend To...Ch. 11 - Computing Shares Outstanding The 2016 annual...Ch. 11 - Reporting Stockholders' Equity and Determining...Ch. 11 - Preparing the Stockholders' Equity Section of the...Ch. 11 - Reporting the Stockholders' Equity Section of the...Ch. 11 - Determining the Effects of the Issuance of Common...Ch. 11 - Recording and Reporting Stockholders' Equity...Ch. 11 - Finding Amounts Missing from the Stockholders'...Ch. 11 - Recording Treasury Stock Transactions and...Ch. 11 - Prob. 9ECh. 11 - Computing Dividends on Preferred Stock and...Ch. 11 - Recording Dividends and Preparing a Statement of...Ch. 11 - Analyzing Stock Dividends On December 31, the...Ch. 11 - Prob. 13ECh. 11 - Comparing 100 percent Stock Dividend and 2-for-1...Ch. 11 - Journalizing Cash Dividends Bogscraft Company has...Ch. 11 - Preparing a Statement of Retained Earnings and...Ch. 11 - Determining the Effect of a Stock Repurchase on...Ch. 11 - (Supplement 11 A) Comparing Stockholders' Equity...Ch. 11 - Prob. 19ECh. 11 - Analyzing Accounting Equation Effects, Recording...Ch. 11 - Recording Stock Dividends Activision Blizzard,...Ch. 11 - Finding Missing Amounts At December 31, the...Ch. 11 - Prob. 4CPCh. 11 - Prob. 5CPCh. 11 - Analyzing Accounting Equation Effects, Recording...Ch. 11 - Recording Cash Dividends National Chocolate Corp....Ch. 11 - Finding Missing Amounts At December 31, the...Ch. 11 - Calculating Common and Preferred Cash Dividends...Ch. 11 - Prob. 5PACh. 11 - Analyzing Accounting Equation Effects, Recording...Ch. 11 - Prob. 2PBCh. 11 - Prob. 3PBCh. 11 - Prob. 4PBCh. 11 - Prob. 5PBCh. 11 - Financial Reporting of Depreciation, Write-off,...Ch. 11 - Prob. 2COPCh. 11 - Prob. 1SDCCh. 11 - Prob. 2SDCCh. 11 - Prob. 4SDCCh. 11 - Prob. 5SDCCh. 11 - Critical Thinking: Making a Decision asan Investor...Ch. 11 - CC11 Accounting for Equity Financing Nicole has...
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- The following are extracts from the financial statements for the year ended 31 January 20X3 of M: $'000 Issued ordinary shares of $1 200 Share premium account 50 Retained profit 25 Loan stock 80 Profit before interest for the year ended 31 January 20X3 60 What is the return on total capital employed?arrow_forwardStatement of stockholders' equity Climate Control Systems Co. offers its services to residents in the Spokane area. Selected accounts from the ledger of Climate Control Systems for the fiscal year ended December 31, 20Y2, are as follows: Common Stock Jan. 1 75,000 Feb. 15 25,000 Retained Earnings Dividends 160,000 Jan. 1 (20Y2) 40.000lDec. 31 Dec. 31 4,150,800 Mar. 31 160,000 Dec. 31 700,000 June 30 40,000 Sept. 30 40,000 Dec. 31 40,000 / Prepare a statement of stockholders' equity for the year ended December 31, 20Y2. If a net loss is incurred or dividends were paid, enter that amount as a negative number using a minus sign. Climate Control Systems Co. Statement of Stockholders' Equity For the Year Ended December 31, 20Y2 Common Stock Retained Earnings Total Balances, January 1, 20Y2 v Issued common stock v Net income v Dividends v Balances, December 31, 20Y2 v Feedback Check My Work Compare the classification of income and expenses for the two companies.arrow_forwardView Policies Current Attempt in Progress The following information is available for Metlock Hill Corporation: Beginning common stockholders equity $790,000 Dividends paid to common stockholders 60,000 Dividends paid to preferred stockholders 32,000 Ending common stockholders'equity 1,000,000 Net income 219,950 Based on the preceding information, calculate return on common stockholders'equity. Return on common stockholders' equity eTextbook and Media Attempts: 0 of 3 used Submit Answer Save for Laterarrow_forward
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