The comparative financial statements of Stargel Inc. are as follows. The market price of Stargel common stock was $119.70 on December 31, 20Y2. Stargel Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Retained earnings, January 1 $5,375,000 $4,545,000 Net income 900,000 925,000 Total $6,275,000 $5,470,000 Dividends: Preferred stock dividends $45,000 $45,000 Common stock dividends 50,000 50,000 Total dividends $95,000 $95,000 Retained earnings, December 31 $6,180,000 $5,375,000 Stargel Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Sales $10,000,000 $9,400,000 Cost of goods sold 5,350,000 4,950,000 Gross profit $4,650,000 $4,450,000 Selling expenses $2,000,000 $1,880,000 Administrative expenses 1,500,000 1,410,000 Total operating expenses $3,500,000 $3,290,000 Income from operations $1,150,000 $1,160,000 Other revenue 150,000 140,000 $1,300,000 $1,300,000 Other expense (interest) 170,000 150,000 Income before income tax $1,130,000 $1,150,000 Income tax expense 230,000 225,000 Net income $900,000 $925,000 Stargel Inc. Comparative Balance Sheet December 31, 20Y2 and 20Y1 20Y2 20Y1 Assets Current assets: Cash $500,000 $400,000 Marketable securities 1,010,000 1,000,000 Accounts receivable (net) 740,000 510,000 Inventories 1,190,000 950,000 Prepaid expenses 250,000 229,000 Total current assets $3,690,000 $3,089,000 Long-term investments 2,350,000 2,300,000 Property, plant, and equipment (net) 3,740,000 3,366,000 Total assets $9,780,000 $8,755,000 Liabilities Current liabilities $900,000 $880,000 Long-term liabilities: Mortgage note payable, 10% $200,000 $0 Bonds payable, 10% 1,500,000 1,500,000 Total long-term liabilities $1,700,000 $1,500,000 Total liabilities $2,600,000 $2,380,000 Stockholders' Equity Preferred $0.90 stock, $10 par $500,000 $500,000 Common stock, $5 par 500,000 500,000 Retained earnings 6,180,000 5,375,000 Total stockholders' equity $7,180,000 $6,375,000 Total liabilities and stockholders' equity $9,780,000 $8,755,000 Required: 14. Return on common stockholders’ equity 15. Earnings per share on common stock 16. Price-earnings ratio 17. Dividends per share of common stock 18. Dividend yield

The comparative financial statements of Stargel Inc. are as follows. The market price of Stargel common stock was $119.70 on December 31, 20Y2. Stargel Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Retained earnings, January 1 $5,375,000 $4,545,000 Net income 900,000 925,000 Total $6,275,000 $5,470,000 Dividends: Preferred stock dividends $45,000 $45,000 Common stock dividends 50,000 50,000 Total dividends $95,000 $95,000 Retained earnings, December 31 $6,180,000 $5,375,000 Stargel Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Sales $10,000,000 $9,400,000 Cost of goods sold 5,350,000 4,950,000 Gross profit $4,650,000 $4,450,000 Selling expenses $2,000,000 $1,880,000 Administrative expenses 1,500,000 1,410,000 Total operating expenses $3,500,000 $3,290,000 Income from operations $1,150,000 $1,160,000 Other revenue 150,000 140,000 $1,300,000 $1,300,000 Other expense (interest) 170,000 150,000 Income before income tax $1,130,000 $1,150,000 Income tax expense 230,000 225,000 Net income $900,000 $925,000 Stargel Inc. Comparative Balance Sheet December 31, 20Y2 and 20Y1 20Y2 20Y1 Assets Current assets: Cash $500,000 $400,000 Marketable securities 1,010,000 1,000,000 Accounts receivable (net) 740,000 510,000 Inventories 1,190,000 950,000 Prepaid expenses 250,000 229,000 Total current assets $3,690,000 $3,089,000 Long-term investments 2,350,000 2,300,000 Property, plant, and equipment (net) 3,740,000 3,366,000 Total assets $9,780,000 $8,755,000 Liabilities Current liabilities $900,000 $880,000 Long-term liabilities: Mortgage note payable, 10% $200,000 $0 Bonds payable, 10% 1,500,000 1,500,000 Total long-term liabilities $1,700,000 $1,500,000 Total liabilities $2,600,000 $2,380,000 Stockholders' Equity Preferred $0.90 stock, $10 par $500,000 $500,000 Common stock, $5 par 500,000 500,000 Retained earnings 6,180,000 5,375,000 Total stockholders' equity $7,180,000 $6,375,000 Total liabilities and stockholders' equity $9,780,000 $8,755,000 Required: 14. Return on common stockholders’ equity 15. Earnings per share on common stock 16. Price-earnings ratio 17. Dividends per share of common stock 18. Dividend yield

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 4PB

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Question

The comparative financial statements of Stargel Inc. are as follows. The market price of Stargel common stock was $119.70 on December 31, 20Y2.

Stargel Inc.
Comparative Retained Earnings Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2	20Y1
Retained earnings, January 1	$5,375,000		$4,545,000
Net income	900,000		925,000
Total	$6,275,000		$5,470,000
Dividends:
	Preferred stock dividends	$45,000		$45,000
	Common stock dividends	50,000		50,000
		Total dividends	$95,000		$95,000
Retained earnings, December 31	$6,180,000		$5,375,000

Stargel Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2	20Y1
Sales	$10,000,000		$9,400,000
Cost of goods sold	5,350,000		4,950,000
Gross profit	$4,650,000		$4,450,000
Selling expenses	$2,000,000		$1,880,000
Administrative expenses	1,500,000		1,410,000
Total operating expenses	$3,500,000		$3,290,000
Income from operations	$1,150,000		$1,160,000
Other revenue	150,000		140,000
	$1,300,000		$1,300,000
Other expense (interest)	170,000		150,000
Income before income tax	$1,130,000		$1,150,000
Income tax expense	230,000		225,000
Net income	$900,000		$925,000

Stargel Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
	20Y2	20Y1
Assets
Current assets:
	Cash	$500,000		$400,000
	Marketable securities	1,010,000		1,000,000
	Accounts receivable (net)	740,000		510,000
	Inventories	1,190,000		950,000
	Prepaid expenses	250,000		229,000
		Total current assets	$3,690,000		$3,089,000
Long-term investments	2,350,000		2,300,000
Property, plant, and equipment (net)	3,740,000		3,366,000
Total assets	$9,780,000		$8,755,000
Liabilities
Current liabilities	$900,000		$880,000
Long-term liabilities:
	Mortgage note payable, 10%	$200,000		$0
	Bonds payable, 10%	1,500,000		1,500,000
		Total long-term liabilities	$1,700,000		$1,500,000
Total liabilities	$2,600,000		$2,380,000
Stockholders' Equity
Preferred $0.90 stock, $10 par	$500,000		$500,000
Common stock, $5 par	500,000		500,000
Retained earnings	6,180,000		5,375,000
Total stockholders' equity	$7,180,000		$6,375,000
Total liabilities and stockholders' equity	$9,780,000		$8,755,000

Required:

14.	Return on common stockholders’ equity
15.	Earnings per share on common stock
16.	Price-earnings ratio
17.	Dividends per share of common stock
18.	Dividend yield

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