Question

4. (5 points) The following information was taken from the records of Carla Inc. for the year 2017: Income tax rate is 25%. Gain on sale of equipment $65,300 Preferred Stock dividends $22,200 Loss on discontinued operations (pretax) 115,000 Retained earnings January 1, 2017 651,900 Administrative expenses 260,100 Cost of goods sold 724,300 Rent revenue 45,400 Selling expenses 310,100 Loss on write-down of inventory 69,700 Sales Revenue 1,889,200 Interest expense 85,770 Common shares outstanding during 2017 were 102,000. Required: a. Calculate earnings per share for income from continuing operations b. Calculate earnings per share for discontinued operations c. Calculate earnings per share for net income

Answer 1

a. Earnings per share for Income from continuing operations b. Earnings per share for discontinued operations c. Earnings per share for net income $ $ $ 4.46 0.85 3.61 Working Notes: Carla inc. Income Statement For the Year Ended December 31,2017 Revenue Sales Revenue $1,889.200 Gain on Sale of equipment $ 65,300 Rent Revenue $ 45,400 Total revenues Expenses Cost of Goods sold $ 724,300 Selling expenses $ 310,100 Administrative Expenses $ 260,100 Loss on Written-down of Inventory $ 69,700 Total expenses $ 1,999,900 $1,364,200

$ 635,700 $ 158,925 $ 476,775 Income from Continuing operation before income Tax Income Tax Income from continuing operations Discontinued operations Loss on discontinued operations Less: Applicable Income Tax reduction Net Income $ 115,000 $ 28,750 $ 86,250 $ 390,525 Earnings per shares Income from continuing operations Discontinued operations Net Income $ $ $ 4.46 0.85 3.61 Income tax = $635,700*25% = $158,925 Applicable taxreduction of Discontinued operations = $115,000*25% = $28,750 Earnings per Share Income from continuing operations = ($476,775-$22.200)/102,000 = $4.46 Discontinued Operations = $86,250/102,000 = $.85 Net Income = ($390,525-$22,200)/102,000 = $3.61