Question

3-1. (Computing earnings per share) If ABC Company earned $280,000 in net income and paid cash dividends of $40,000, what are ABC's earnings per share and dividends per share if it has 80,000 shares outstanding? 3-2. (Preparing an income statement) Prepare an income statement and a common-sized income statement from the following information. Sales $525,000 Cost of goods sold 200,000 General and administrative expenses 62,000 Depreciation expenses 8,000 Interest expense 12,000 Income taxes 97,200

Answer 1

3.1) Earning per share = (280000-40000)/80000 = $3 per share

3.2) Income statement

	$	%
Sales	525000	100%
Cost of goods sold	200000	38.10%
Gross profit	325000	61.90%
Operating expense
General and administrative expense	62000	11.81%
Depreciation expense	8000	1.52%
Total operating expense	70000	13.33%
Income from operation	255000	48.57%
Interest expense	12000	2.29%
Income before taxes	243000	46.29%
Income taxes	97200	18.51%
Net income	145800	27.77%