The Income Statement for Pointe Company for the Year Ended

question 122

Essay

The income statement for Pointe Company for the year ended December 31 2017 appears below. $\begin{array}{ll}\text { Sales } & \$ 720,000 \\\text { Cost of goods sold } & \$ 380,000 \\\text { Gross profit } & 340,000 \\\text { Expenses } & 190,000^{*} \\\text { Net income } & \$ 150,000\end{array}$ *Includes $20000 of interest expense and $25000 of income tax expense.
Additional information:
1. Common stock outstanding on January 1 2017 was 50000 shares. On July 1 2017 10000 more shares were issued.
2. The market price of Pointe's stock was $11.70 at the end of 2017.
3. Cash dividends of $30000 were paid $7000 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.

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Definitions:

Goodwill

An intangible asset that arises when one company acquires another for a premium value, representing the excess of the purchase price over the fair market value of the identifiable assets and liabilities.

Indefinite Life

An intangible asset's useful life that is not limited to a predetermined period and could extend indefinitely.

Amortized

The process of spreading out a loan or intangible asset into a series of fixed payments over time, reducing the value of the asset or paying off the debt.

Held-To-Maturity Investment

An investment in debt securities that a company has the intent and ability to hold until maturity.