Question

The following information pertains to Bridgeport Co.:

Answer 1

Answer:

A. Total amount of stockholders' equity in the balance sheet.

= Preferred stock + Common Stock + Additional Paid-In Capital + Unappropriated retained earnings + Retained earnings  appropriated for  contingencies - Treasury stock

= (100 * 10,000) + (10 * 140,000) + 500,000 + 280,000 + 300,000 - 250,000

= $‭3,230,000‬

B. Earnings per share of common stock.

= (Net Income - Preferred Dividends ) / (Common stock - treasury stock)

= (580,000 - (10,000 * 6% * 100) ) / (140,000 - 10,000)

= $4

C. Book value per share of common stock.

= (Stockholder's equity - Preferred stock) / ( Common stock - Treasury)

= (3,230,000 - (100 * 10,000) ) / (140,000 - 10,000)

= $17.15

D. Payout ratio of common stock

= Dividend per share/ Earnings per share

= 1.8/4

= 45%

E. Return on common stock equity

= (Net Income - Preferred Dividends ) / (Stockholder's equity - Preferred stock)

= (580,000 - (10,000 * 6% * 100) / (3,230,000 - (100 * 10,000) )

= 0.233

= 23.3%