Monty Corporation is preparing the comparative financial statements to be included in the annual report to stockholders. Monty employs a fiscal year ending May 31. Income from operations before income taxes for Monty was $1,320,000 and $706,000, respectively, for fiscal years ended May 31, 2021 and 2020. Monty experienced a loss from discontinued operations of $438,000 on March 3, 2021. A 20% combined income tax rate pertains to any and all of Monty Corporation’s profits, gains, and losses. Monty’s capital structure consists of preferred stock and common stock. The company has not issued any convertible securities or warrants and there are no outstanding stock options. Monty issued 38,100 shares of $100 par value, 6% cumulative preferred stock in 2017. All of this stock is outstanding, and no preferred dividends are in arrears. There were 1,092,000 shares of $1 par common stock outstanding on June 1, 2019. On September 1, 2019, Monty sold an additional 405,600 shares of the common stock at $18 per share. Monty distributed a 20% stock dividend on the common shares outstanding on December 1, 2020. These were the only common stock transactions during the past 2 fiscal years. (a) Your answer is correct. Determine the weighted-average number of common shares that would be used in computing earnings per share on the current comparative income statement for: Weighted-average number of common shares (1) The year ended May 31, 2020. (2) The year ended May 31, 2021. (b) Starting with income from operations before income taxes, prepare a comparative income statement for the years ended May 31, 2021 and 2020. The statement will be part of Monty Corporation’s annual report to stockholders and should include appropriate earnings per share presentation. (Round earnings per share to 2 decimal places, e.g. $2.55.)

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter18: Accounting For Income Taxes

Section: Chapter Questions

Problem 9MC: Brooks Company reported a prior period adjustment of 512,000 in pretax financial "income" and...

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Monty Corporation is preparing the comparative financial statements to be included in the annual report to stockholders. Monty employs a fiscal year ending May 31.

Income from operations before income taxes for Monty was $1,320,000 and $706,000, respectively, for fiscal years ended May 31, 2021 and 2020. Monty experienced a loss from discontinued operations of $438,000 on March 3, 2021. A 20% combined income tax rate pertains to any and all of Monty Corporation’s profits, gains, and losses.

Monty’s capital structure consists of preferred stock and common stock. The company has not issued any convertible securities or warrants and there are no outstanding stock options.

Monty issued 38,100 shares of $100 par value, 6% cumulative preferred stock in 2017. All of this stock is outstanding, and no preferred dividends are in arrears.

There were 1,092,000 shares of $1 par common stock outstanding on June 1, 2019. On September 1, 2019, Monty sold an additional 405,600 shares of the common stock at $18 per share. Monty distributed a 20% stock dividend on the common shares outstanding on December 1, 2020. These were the only common stock transactions during the past 2 fiscal years.

(a)


	Your answer is correct.

Determine the weighted-average number of common shares that would be used in computing earnings per share on the current comparative income statement for:

		Weighted-average number of common shares
(1)	The year ended May 31, 2020.
(2)	The year ended May 31, 2021.

(b)

Starting with income from operations before income taxes, prepare a comparative income statement for the years ended May 31, 2021 and 2020. The statement will be part of Monty Corporation’s annual report to stockholders and should include appropriate earnings per share presentation. (Round earnings per share to 2 decimal places, e.g. $2.55.)

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