Current liabilities s Working capital s 21 Consider the bal

Current liabilities: s_ Working capital: s_ - 2.1 Consider the balance-sheet entries for war Eagle Corporation in Table P2.1 (a) Compute the firm\'s Shareholders\' equity: s_ - Current assets: $-- Problems 47 TABLE P2.1 Balance Sheet Statement as of December 31, 2015 Assets Cash Marketable securities Accounts receivable $ 150, 200,000 150,000 Prepaid taxes and izsurance Masufacturing plant af cost Less accurnulated depresciation Net fixed assets 30,000 s 600,000 100,000 300,000 20,000 Liabilities and Shareholders\' Equity Notes payable Accounts payable Income taxes payable Long-tern mortgage bonds Preferred stock, 6%, $100 par value (1,000 shares) Common stock, $15 par value (10,000 shares) Capital surplus 50,000 100,000 400,000 100,000 150,000 150,000 . (b) If the firm had a net income of $500,000 after (d) Compute the net cash flow from the project dur- taxes, what are the earnings per share? ing the first year Financial Ratio Analysis (c) When the firm issued its common stock, what was the market price of the stock per share?

Solution

Part a Computation of firm\'s a Current Assets Cash 150000 Marketable securities 200000 Accounts Receivable 150000 Inventory 50000 Prepaid Taxes & Insurance 30000 Total Current Assets 580000 b Current Liabilities Notes Payable 50000 Accounts Payable 100000 Income Taxes Payable 80000 Total Current Liabilities 230000 c Working Capital =a-b 350000 d Shareholder\'s equity Preffered Stock 100000 Common Stock 150000 Capital Surplus 150000 Retained Earnings 70000 Total Shareholder\'s Equity 470000 Part b Earning Per share=Earning after Taxes/No. of common stock Outstanding = $500000/10000 = 50 Part c The firm must have issued its common stock at market price of $30 per share as per following calcluation. Common stock, 10000 shares@15 par 150000 Capital Surplus 150000 Total     A 300000 No. of shares     B 10000 Market price per share =A/B 30 Note : we have assumed that capital surplus has arised due to issuance of common stock