The income statement for the Carolina Service Company for the year ended December 31, 2014, appears below. $$\begin{array} { l l }
\text { Sales revenue } & \$ 670,000 \
\text { Cost of goods sold } & 390,000 \
\text { Gross profit } & 280,000 \
\text { Expenses } & \underline{ 180,000 ^ { * } } \
\text { Net income } & \underline{\$ 100,000}
\end{array}$$
*Includes $25,000 of interest expense and $20,000 of income tax expense.
Additional information:
1. Common stock outstanding on January 1, 2014, was 50,000 shares. On July 1, 2014, 10,000 more shares were issued.
2. The market price of Carolina's stock was $22 at the end of 2014.
3. Cash dividends of $35,000 were paid, $5,000 of which were paid to preferred stockholders.
Instructions
Compute the following ratios for 2014:
(a) Earnings per share.
(b) Price-earnings.
(c) Times interest earned.

Question

The income statement for the Carolina Service Company for the year ended December 31, 2014, appears below. $$\begin{array} { l l } 
\text { Sales revenue } & \$ 670,000 \
\text { Cost of goods sold } & 390,000 \
\text { Gross profit } & 280,000 \
\text { Expenses } & \underline{ 180,000 ^ { * } } \
\text { Net income } & \underline{\$ 100,000}
\end{array}$$ 
*Includes $25,000 of interest expense and $20,000 of income tax expense.
Additional information:
1. Common stock outstanding on January 1, 2014, was 50,000 shares. On July 1, 2014, 10,000 more shares were issued.
2. The market price of Carolina's stock was $22 at the end of 2014.
3. Cash dividends of $35,000 were paid, $5,000 of which were paid to preferred stockholders.
Instructions
Compute the following ratios for 2014:
(a) Earnings per share.
(b) Price-earnings.
(c) Times interest earned.

Quizplus · Accepted Answer

The Answer of The income statement for the Carolina Service Company for the year ended December 31, 2014, appears below. $$\begin{array} { l l } 
\text { Sales revenue } & \$ 670,000 \
\text { Cost of goods sold } & 390,000 \
\text { Gross profit } & 280,000 \
\text { Expenses } & \underline{ 180,000 ^ { * } } \
\text { Net income } & \underline{\$ 100,000}
\end{array}$$ 
*Includes $25,000 of interest expense and $20,000 of income tax expense.
Additional information:
1. Common stock outstanding on January 1, 2014, was 50,000 shares. On July 1, 2014, 10,000 more shares were issued.
2. The market price of Carolina's stock was $22 at the end of 2014.
3. Cash dividends of $35,000 were paid, $5,000 of which were paid to preferred stockholders.
Instructions
Compute the following ratios for 2014:
(a) Earnings per share.
(b) Price-earnings.
(c) Times interest earned.

The Income Statement for the Carolina Service Company for the Year