Question

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Exercise 16-19 A portion of the combined statement of income and retained earnings of Waterway 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 $14,900,000 1,360,000 13,540,000 84,830,000 98,370,000 Dividends declared: On preferred stock-$6.00 per share On common stock-$1.75 per share Retained earnings at the end of the year $318,000 14,670,000 14,988,000 $83,382,000 Note 1. During the year, Waterway Inc. suffered a major loss from discontinued operations of $1,360,000 after applicable income tax reduction of $1,230,000. At the end of the current year, Waterway Inc. has outstanding 8,330,000 shares of $10 par common stock and 53,000 shares of 6% preferred. On April 1 of the current year, Waterway Inc. issued 980,000 shares of common stock for $31 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.) Waterway Inc. Income Statement For the Year Ended December 31

Answer 1

Waterways Inc.
Income Statements
For the year ended Dec.31
Income before extraordinary item	$ 14,900,000.00
Deduct :  dividend on preferred stock	$    (318,000.00)
Common stock income before extraordinary item	$ 15,218,000.00
Deduct extraordinary loss, net of tax	$ (1,360,000.00)
Net income available for common stockholders	$ 28,440,000.00
Weighted average number of shares outstanding
Dates Outstanding	Shares Outstanding	Fraction of Year	Weighted Shares
January 1–April	7350000	3/12	1837500
April 1–December 31	8330000	9/12	6247500
Weighted average number of shares outstanding			8085000
Earnings per share of common stock:
Income before extraordinary loss (15,218,000/8085000)	$                 1.88
Extraordinary loss, net of tax (1360000/8085000)	$               (0.17)
Net income (284400000/8085000)	$                 3.52