The income statement for Pointe Company for the year ended December 31, 2017 appears below.

Sales$720,000

Cost of goods sold380,000

Gross profit340,000

Expenses190,000*

Net income$150,000

*Includes $20,000 of interest expense and $25,000 of income tax expense.

Additional information:

1.Common stock outstanding on January 1, 2017 was 50,000 shares. On July 1, 2017, 10,000 more shares were issued. The weighted-average shares are 55,000.

2.The market price of Pointe's stock was $11.70 at the end of 2017.

3.Cash dividends of $30,000 were paid, $7,000 of which were paid to preferred stockholders.

Instructions

Compute the following ratios for 2017:

(a)Earnings per share.

(b)Price-earnings.

(c)Times interest earned.

7 Solution

(a)Earnings per share

(b)Price-earnings

(c)Times interest earned