Question

Tolman, Inc. had reported the following balances: (Click the icon to view the 2018 and 2019 balances.) 11. Compute Tolman's earnings per share for 2019. 12. Compute Tolman's pricelearnings ratio for 2019, assuming the market price is $48 per share. 13. Compute Tolman's rate of return on common stockholders' equity for 2019. 11. Compute Tolman's earnings per share for 2019. Select the formula, then enter the amounts to calculate the company's earnings per share for 2019. (Abbreviations used: Ave. = average, OS = outstanding, SE = stockholders' equity, shrs = shares. Round earnings per share to the nearest cent.) | = Earnings per share 12. Compute Tolman's pricelearnings ratio for 2019, assuming the market price is $48 per share. Select the formula, then enter the amounts to calculate the company's pricelearnings ratio for 2019. (Abbreviations used: Ave. = average, OS = outstanding, SE = stockholders' equity, shrs = shares. Round the ratio to two decimal places.) | = Pricelearnings ratio 13. Compute Tolman's rate of return on common stockholders' equity for 2019. Select the formula, then enter the amounts to calculate the company's rate of return on common stockholders' equity for 2019. (Abbreviations used: Ave. = average, OS = outstanding, SE = stockholders' equity, shrs = shares. Round your answer to the nearest tenth percent, X.X%.) = Rate of return on common SE 1 0 Data Table $ December 31, 2019 86,000 5,000 338,000 $ December 31, 2018 70,000 4,500 316,000 Net Income Preferred Dividends Total Stockholders' Equity Stockholders' Equity attributable to Preferred Stock Number of Common Shares Outstanding 30,000 30,000 15,000 9,000 Print Done

Answer 1

11.

Number of common shares outstanding , Beginning= 9,000

Number of common shares outstanding , Ending = 15,000

Average number of common shares outstanding = (Number of common shares outstanding , Beginning + Number of common shares outstanding , Ending)/2

= (9,000+15,000)/2

= 12,000

( Net Income	-	Preferred dividend)	/	Average number of Common shares outstanding	=	Earning Per Share
(86,000	-	5,000)	/	12,000	=	$6.75

12.

Market price of 1 share	/	Earning per share	=	Price/earning ratio
48	/	6.75	=	7.11

13.

Total stockholders equity, beginning = $316,000

Stockholders equity attributable to preferred stock, beginning = $30,000

Common stockholders equity, beginning = Total stockholders equity, beginning - Stockholders equity attributable to preferred stock, beginning

= 316,000-30,000

= $286,000

Total stockholders equity, Ending = $338,000

Stockholders equity attributable to preferred stock, Ending = $30,000

Common stockholders equity, ending = Total stockholders equity, ending - Stockholders equity attributable to preferred stock, ending

= 338,000-30,000

= $308,000

Average common stockholders equity = (Common stockholders equity, beginning +Common stockholders equity, ending )/2

= (286,000+308,000)/2

= $297,000

(Net income	-	Preferred dividend)	/	Average common stockholders equity	=	Rate of return on common stockholders Equity
(86,000	-	5,000)	/	297,000	=	27.27%

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