Question

On January 1, 2020, Concord Industries had stock outstanding as follows.

6% Cumulative preferred stock, $100 par value, issued and outstanding 9,300 shares		$930,000
Common stock, $10 par value, issued and outstanding 208,000 shares		2,080,000

To acquire the net assets of three smaller companies, Concord authorized the issuance of an additional 156,000 common shares. The acquisitions took place as shown below.

Date of Acquisition		Shares Issued
Company A April 1, 2020		50,400
Company B July 1, 2020		76,800
Company C October 1, 2020		28,800

On May 14, 2020, Concord realized a $88,800 (before taxes) insurance gain on discontinued operations. On December 31, 2020, Concord recorded income of $285,600 from continuing operations (after tax).

Assuming a 20% tax rate, compute the earnings per share data that should appear on the financial statements of ConcordIndustries as of December 31, 2020. (Round answer to 2 decimal places, e.g. $2.55.)

Answer 1

DE F Calculation of net profit attributable to equity shareholders : Income from continuing $285,600 operation after tax Add: Tax @ 20 % $71,400 Income from continuing $357,000 operation before tax Add: Extra ordinary gain $88,800 (insurance gain on discontinued operation) Profit before tax $445,800 Tax@20% $89,160 Profit after tax $356,640 Less: Preference Dividend $55,800 ($930,000*6%) Net profit available to equity $300,840 shareholders No of shares Date of issue Held for months Weighted average Ol S shares 208000 37800 12 9 Opening shares Company A shares Company B shares Company C shares Total 208,000 50,400 76,800 28.800 1-Apr-20 1-Jul-20 1-Oct-20 3 38400 7200 291400 EPS = Net profit available to equity shareholders/Weighted average O/S shares =300840/291400 $1.0324

Workings:

В C D E F G Calculation of net profit attributable to equity shareholders : Income from continuing $285,600 operation after tax Add: Tax @ 20 % (C5/(1-0.2))*0.2 Income from continuing operation before tax C5+C6 Add: Extra ordinary gain $88,800 (insurance gain on discontinued operation) Profit before tax C9+C7 Tax@20% C11*0.2 Profit after tax C11-C12 Less: Preference Dividend 930000*6% ($930,000*6%) Net profit available to equity shareholders No of shares Date of issue 12 Opening shares Company A shares Company B shares Company C shares Total 208,000 50,400 76,800 28,800 1-Apr-20 1-Jul-20 1-Oct-20 Weighted Held for average Ol months S shares (C21*E21/12 C22*E22)/12 C23*E23)12 3 C24*E24/12 F21+F22+F23+F24 EPS Net profit available to equity shareholders/Weighted average o/S shares 300840/291400 300840/291400

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