Question

HW chapter 16 Send to Gradebook < Prev Next > Question 2 --/1 View Policies Current Attempt in Progress A portion of the combined statement of income and retained earnings of Tamarisk Inc. for the current year follows. Income before extraordinary item Loss from discontinued operations, net of applicable income tax (Note 1) Net income Retained earnings at the beginning of the year $15,060,000 1,320,000 13,740,000 84,220,000 97,960,000 Dividends declared: On preferred stock-$6.00 per share On common stock-$1.75 per share Retained earnings at the end of the year $300,000 15,050,000 15,350,000 $82,610,000 Note 1. During the year, Tamarisk Inc. suffered a major loss from discontinued operations of $1,320,000 after applicable income tax reduction of $1,220,000. At the end of the current year, Tamarisk Inc. has outstanding 8,670,000 shares of $10 par common stock and 50,000 shares of 6% preferred. On April 1 of the current year, Tamarisk Inc. issued 980,000 shares of common stock for $32 per share to help finance the loss from discontinued operations. Compute the earnings per share on common stock for the current year as it should be reported to stockholders. (Round answer to 2 decimal places, e.g. $2.55.) Tamarisk Inc. Income Statement

Answer 1

Solution

Tamarisk Inc

Computation of the earnings per share on common stock for the current year as it should be reported to stockholders:

Tamarisk Inc
Income Statement
Income before extraordinary item		$15,060,000
Less: preference dividend		$300,000
Earnings for shareholders		$14,760,000
Less: extraordinary loss		$1,320,000
earnings for shareholders		$13,440,000
Shares outstanding
1st Jan to 1st April	(8,670,000 - 980,000) = 7,690,000	03-Dec	1,922,500
1st April to December 31	8,670,000	09-Dec	6,502,500
			8,425,000
Earnings per share	earnings for shareholders/number of shares outstanding
	$14,760,000/8,425,000	$1.75
Earnings per share	extraordinary loss net of assets/number of shares outstanding
	$1,320,000/8,425,000	$0.16
Earnings per share	Earnings for common stockholders after extraordinary loss/number of shares outstanding
	$13,440,000/8,425,000	$1.59