The income statement for the Yarrah Ltd for the year ended 31 December 2020 appears below.
*Includes $30,000 of interest expense and $16,000 of income tax expense.
Additional information:
1. Ordinary shares outstanding on 1 January 2020 was 50,000 shares. On 1 July 2020
10,000 more shares were issued.
2. The market price of Yarrah shares was $12 at the end of 2020.
3. Cash dividends of $30,000 were paid, $6,000 of which were paid to preferred shareholders.
Compute the following ratios for 2020:
(a) earnings per share
(b) price-earnings ratio
(c) times interest earned.

Question

The income statement for the Yarrah Ltd for the year ended 31 December 2020 appears below.
  *Includes $30,000 of interest expense and $16,000 of income tax expense.
Additional information:
1. Ordinary shares outstanding on 1 January 2020 was 50,000 shares. On 1 July 2020
10,000 more shares were issued.
2. The market price of Yarrah shares was $12 at the end of 2020.
3. Cash dividends of $30,000 were paid, $6,000 of which were paid to preferred shareholders.
Compute the following ratios for 2020:
(a) earnings per share
(b) price-earnings ratio
(c) times interest earned.

Quizplus · Accepted Answer

The Answer of The income statement for the Yarrah Ltd for the year ended 31 December 2020 appears below.
  *Includes $30,000 of interest expense and $16,000 of income tax expense.
Additional information:
1. Ordinary shares outstanding on 1 January 2020 was 50,000 shares. On 1 July 2020
10,000 more shares were issued.
2. The market price of Yarrah shares was $12 at the end of 2020.
3. Cash dividends of $30,000 were paid, $6,000 of which were paid to preferred shareholders.
Compute the following ratios for 2020:
(a) earnings per share
(b) price-earnings ratio
(c) times interest earned.

The Income Statement for the Yarrah Ltd for the Year