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Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124

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Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124
Textbook Problem
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Earnings per share, discontinued operations

The net income reported on the income statement of Cutler Co. was $4,000,000. There were 500,000 shares of $10 par common stock and 100,000 shares of $2 preferred stock outstanding throughout the current year. The income statement included a gain on discontinued operations of $400,000 after applicable income tax. Determine the per-share figures for common stock for (a) income before discontinued operations and (b) net income.

(a)

To determine

Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company.

Given info: Items from financial statements

To determine:  The per share figures for common stock for

  1. a) Income before discontinued operations
Explanation

Earnings per share help to measure the profitability of a company. Earnings per share are the amount of profit that is allocated to each share of outstanding stock.

Formula:

Earningspershare on incomebefore discontinued operations} = Income before discontiued operations – PreferreddividendsWeighted average number of common shares outstanding

Working note for determination of earnings before discontinued operations and preferred divide

(b)

To determine

the Net income

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