Question: The income statement, statement of retained earnings, and balance sheet for Somerville Company are as follows:
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Somerville Company
Income Statement
For the Year Ended December 31, 2014
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Amount
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Percent
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Net sales
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$8,281,989
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100.0%
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Less: Cost of goods sold
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(5,383,293)
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65.0
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Gross margin
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$2,898,696
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35.0
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Less: Operating expenses
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(1,323,368)
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16.0
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Operating income
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$1,575,328
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19.0
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Less: Interest expense
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(50,000)
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0.6
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Net income before taxes
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$1,525,328
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18.4
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Less: Taxes (48%)*
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(732,157)
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8.8
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Net income
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$793,171
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9.6
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* Includes both state and federal taxes.
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Somerville Company
Statement of Retained Earnings
For the Year Ended December 31, 2014
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Balance, beginning of period
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$1,979,155
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Net income
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$793,171
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Total
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$2,772,326
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Less: Preferred dividends
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(80,000)
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Dividends to common stockholders
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(201,887)
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Balance, end of period
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$2,490,439
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Somerville Company
Comparative Balance Sheets
At December 31, 2013 and 2014
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2013
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2014
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Assets
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Current assets:
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Cash
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$2,875,000
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$2,580,000
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Marketable securities
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800,000
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700,000
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Accounts receivable (net)
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939,776
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690,000
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Inventories
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490,000
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260,000
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Other
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93,000
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74,261
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Total current assets
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$5,197,776
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$4,304,261
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Property and equipment:
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Land
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$1,575,000
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$1,067,315
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Building and equipment (net)
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1,348,800
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1,150,000
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Total long-term assets
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$2,923,800
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$2,217,315
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Total assets
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$8,121,576
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$6,521,576
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Liabilities and stockholders' equity
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Current liabilities:
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Notes payable, short term
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$1,170,127
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$ 543,641
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Accounts payable
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420,510
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101,500
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Current maturity of long-term debt
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3,000
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2,000
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Accrued payables
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200,000
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57,780
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Total current liabilities
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$1,793,637
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$ 704,921
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Long-term liabilities:
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Bonds payable, 10%
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500,000
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500,000
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Total liabilities
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$2,293,637
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$1,204,921
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Stockholders' equity:
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Preferred stock, $25 par, 8%
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$1,000,000
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$1,000,000
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Common stock, $1.50 par
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337,500
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337,500
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Additional paid-in capital*
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2,000,000
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2,000,000
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Retained earnings
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2,490,439
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1,979,155
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Total equity
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$5,827,939
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$5,316,655
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Total liabilities and stockholders' equity
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$8,121,576
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$6,521,576
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* For common stock only.
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Computing the Dividend Yield and the Dividend Payout Ratio Refer to the information for Somerville Company on the previous page. Also, assume that the market price per common share is $8.10. Required:
1. Compute the dividends per share.
2. Compute the dividend yield.
3. Compute the dividend payout ratio.