BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

Solutions

Chapter
Section
BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
47 views

Extreme Company reported the following information about its stock on its December 31, 2019, balance sheet:

Chapter 16, Problem 20E, Extreme Company reported the following information about its stock on its December 31, 2019, balance , example  1

The following amounts were taken from Extreme’s income statement:

Chapter 16, Problem 20E, Extreme Company reported the following information about its stock on its December 31, 2019, balance , example  2

The only stock issued during 2019 was 80,000 shares of common stock issued on June 30, 2019. No dividends were declared during 2019.

Required:

  1. 1. Calculate all earnings per share amounts for 2019.
  2. 2. Are dividends on preferred stock taken into account when calculating earnings per share even if they are not declared? If so, why?

1.

To determine

Compute the earnings per share amount for the year 2019.

Explanation

Earnings per share (EPS):

The amount of net income available to each shareholder per common share outstanding is referred to as earnings per share (EPS).

Particulars Amount in $Earnings per  share in $
Income from continuing operations before income taxes680,000 
Income tax expense204,000  
Income from continuing operations476,000 (2) 2.32
Discontinued operations:  
Loss on disposal of division, less tax of $18,000(36,000)(3) (0.18)
Net Income440,000 (4) 2.14

(Table 1)

Working notes:

(1) Calculate the number of weighted shares outstanding:

(Figure 1)

(2) Calculate the earnings per share from the income from continuing operations:

Basic Earnings per share= (Income from continuing operation-Preference  dividend)Average number of shares  outstanding(1)=$476,000$12,000(120,000×$2×5%)200,000=$2

2.

To determine

Identify whether the preferred stock dividend is taken into account while computing earnings per share and also provide the reason if they are not taken into account.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What is the difference between accumulating costs and assigning costs?

Managerial Accounting: The Cornerstone of Business Decision-Making

AMORTIZATION SCHEDULE WITH A BALLOON PAYMENT You want to buy a house that costs 100,000. You have 10,000 for a ...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)