On January 1, 2018, the general ledger of Grand Finale Fireworks includes the fo
ID: 2485888 • Letter: O
Question
On January 1, 2018, the general ledger of Grand Finale Fireworks includes the following account balances During January 2018, the following transactions occur: January 2 Issue an additional 2,000 shares of $1 par value common stock for $40,000. January 9 Provide services to customers on account, $14,300. Purchase additional supplies on account, $4,900. January 10 Repurchase 1,000 shares of treasury stock for $18 per share. Pay cash on accounts payable, $16,500. January 12 Provide services to customers for cash, $49,100. Receive cash on accounts receivable, $16,600. January 15 Declare a cash dividend of $0.30 per share to all shares outstanding on January 29. January The dividend is payable on February 15. January 30 Reissue 600 shares of treasury stock for $20 per share. January 31 Pay cash for salaries during January, $42,000. Calculate the return on equity for the month of January. If the average return on equity for the industry for January is 2.5%, is the company more or less profitable than other companies in the same industry? The return on equity is: Is the company more or less profitable than other companies? How many shares of common stock are outstanding as of January 31, 2018? The number of common shares outstanding as of January 31, 2018 is Calculate earnings per share for the month of January. If earnings per share was $3.60 last year (i.e., an average of $0.30 per month), is earnings per share for January 2018 better or worse than last year's average? Earnings per share is: Is earnings per share for January 2018 better or worse than last year's average? previous nextExplanation / Answer
Working Notes:
Return on Equity for the month of January =(Profit earned / Average equity for January)*100
= 16500/146100 *100 = 11.30%
The company is more profitable than other companies.
Number of Common Stock outstanding as on 31.01.2018 = 11600
Average common shares outstanding = (10000+11600)/2 = 10800
earning per share = Total profit / agerage common stock outstanding = 16500/10800=$1.53 (>0.3)
Earning per share for Janary 2018 is better than last year's average.
Number of Common Stock Common Stock, $1 par Value Additional Paid in capital Retained Earning Total 01-Jan Opening 10000 10000 80000 45100 135100 02-Jan Add New Issue 2000 2000 38000 40000 12-Jan Less Repurchase of Treasury Stock -1000 -1000 -17000 -18000 29-Jan Balance 11000 11000 101000 45100 157100 30-Jan Add New Issue 600 600 12000 12600 30-Jan Retained earnings 13200 30-Jan Balance 11600 11600 113000 58300 182900 29-Jan Average Equity (135100+157100)/2 146100