Kellman Company Year 2 Year 1 Total current assets $600,000 $560,000 Total investments 60,000 40,000 Total property, plant, and equipment 900,000 700,000 Total current liabilities 125,000 65,000 Total long-term liabilities 350,000 250,000 Preferred 9% stock, $100 par 100,000 100,000 Common stock, $10 par 600,000 600,000 Paid-in capital in excess of par-Common stock 75,000 75,000 Retained earnings 310,000 210,000 Using the balance sheets for Kellman Company, if net income is $250,000 and interest expense is $20,000 for Year 2, and the market price of common shares is $30, what is the price-earnings ratio on common stock for Year 2? (Round intermediate calculation to two decimal places and final answers to one decimal place.) O 13.4 O 7.5 O 8.5 O 12.1

Managerial Accounting: The Cornerstone of Business Decision-Making
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Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
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Chapter14: Statement Of Cash Flows
Section: Chapter Questions
Problem 24BEA: During 20X2, Norton Company had the following transactions: a. Cash dividends of 20,000 were paid....
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Kellman Company.
Year 2
Year 1
Total current assets
$600,000
$560,000
Total investments
60,000
40,000
Total property, plant, and equipment
900,000
700,000
Total current liabilities
125,000
65,000
Total long-term liabilities
350,000
250,000
Preferred 9% stock, $100 par
100,000
100,000
Common stock, $10 par
600,000
600,000
Paid-in capital in excess of par-Common stock
75,000
75,000
Retained earnings
310,000
210,000
Using the balance sheets for Kellman Company, if net income is $250,000 and interest expense is $20,000 for Year 2,
and the market price of common shares is $30, what is the price-earnings ratio on common stock for Year 2? (Round
intermediate calculation to two decimal places and final answers to one decimal place.)
O 13.4
O 7.5
O 8.5
O 12.1
Transcribed Image Text:Kellman Company. Year 2 Year 1 Total current assets $600,000 $560,000 Total investments 60,000 40,000 Total property, plant, and equipment 900,000 700,000 Total current liabilities 125,000 65,000 Total long-term liabilities 350,000 250,000 Preferred 9% stock, $100 par 100,000 100,000 Common stock, $10 par 600,000 600,000 Paid-in capital in excess of par-Common stock 75,000 75,000 Retained earnings 310,000 210,000 Using the balance sheets for Kellman Company, if net income is $250,000 and interest expense is $20,000 for Year 2, and the market price of common shares is $30, what is the price-earnings ratio on common stock for Year 2? (Round intermediate calculation to two decimal places and final answers to one decimal place.) O 13.4 O 7.5 O 8.5 O 12.1
Expert Solution
Working:

Dividend on preferred stock = Par value of preferred shares x rate of dividend

= $100000 x 9%

= $9,000

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