Question

Coronado Corporation is preparing the comparative financial statements for the annual report to its shareholders for fiscal years ended May 31, 2020, and May 31, 2021. The income from operations for the fiscal year ended May 31, 2020, was $1,877,000 and income from continuing operations for the fiscal year ended May 31, 2021, was $2,464,000. In both years, the company incurred a 10% interest expense on $2,313,000 of debt, an obligation that requires interest-only payments for 5 years. The company experienced a loss from discontinued operations of $621,000 on February 2021. The company uses a 20% effective tax rate for income taxes.

The capital structure of Coronado Corporation on June 1, 2019, consisted of 968,000 shares of common stock outstanding and 20,300 shares of $50 par value, 6%, cumulative preferred stock. There were no preferred dividends in arrears, and the company had not issued any convertible securities, options, or warrants.

On October 1, 2019, Coronado sold an additional 478,000 shares of the common stock at $20 per share. Coronado distributed a 20% stock dividend on the common shares outstanding on January 1, 2020. On December 1, 2020, Coronado was able to sell an additional 764,000 shares of the common stock at $22 per share. These were the only common stock transactions that occurred during the two fiscal years.

1. Identify whether the capital structure at Coronado Corporation is a simple or complex capital structure.

Simple Capital Structure or Complex Capital Structure?

2. Determine the weighted-average number of shares that Coronado Corporation would use in calculating earnings per share for the fiscal year ended:

				Weighted-average number of shares
(1)		May 31, 2020
(2)		May 31, 2021

3. Prepare, in good form, a comparative income statement, beginning with income from operations, for Coronado Corporation for the fiscal years ended May 31, 2020, and May 31, 2021. This statement will be included in Coronado’s annual report and should display the appropriate earnings per share presentations. (Round earnings per share to 2 decimal places, e.g. $1.55.)

CORONADO CORPORATION Comparative Income Statement For Fiscal Years Ended May 31, 2020 and 2021
	2020	2021
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Earnings Per Share:
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Answer 1

1)

The Capital structure of this corporation is simple as it has only issued Common Stock and Preferred Stock shares. In the complex capital structure company also has the dilutive securities like convertible securities, options, or warrants. In addition to this the companies with Simple Capital structure are only required to report basic EPS whereas the ones with Complex capital structure also need to report EPS with dilluted basis.

2)

01-Jun-19	Cumulative Stock ($50 par value, 6%)	20300
01-Jun-19	Common Stock Outstanding	968000
01-Jan-2020	20% Stock Dividend on Common Stock (968000*20%)	193600
01-Jan-2020	Common Stock ($20 per share sold)	478000
01-Dec-2020	Common Stock ($22 per share sold)	764000
	Outstanding Shares at the end of 2021	2423900

The weighted average number of shares is to be calculated by taking the number of outstanding shares and multiplying the portion of the reporting period these shares covered, this is to be done for each portion and, then sum all.

Period	Transaction	No of shares outstanding	Portion of reporting period	Weighted Shares
Jun-19 to Dec'19	Opening Balance	988300	07/12	576,508
Jan-20 to May'20	Addition and Dividend on Jan 1st 2020	1659900	05/12	691,625
	Weightage Average Number of Shares for 2019-2020			1,268,133
Jun-20 to Nov'20	Opening balance for 2020-2021	1659900	06/12	829,950
Dec-20 to May'21	Addition as on 1st Dec 2020	2423900	06/12	1,211,950
	Weightage Average Number of Shares for 2020-2021			2,041,900

3)

CORONADO CORPORATION
Comparative Income Statement
For Fiscal Years Ended May 31, 2020 and 2021
	2020	2021
Income From Operations	1,877,000.00	2,464,000.00
Interes Expense	(231,300.00)	(231,300.00)
Loss from Discontinued Operations	0	621,000.00
Income before Dividend	1,645,700.00	2,853,700.00
Divided (50 par value, 6% for 20300 shares) (20300*50)*6%	(60,900.00)	(60,900.00)
Income before Tax	1,584,800.00	2,792,800.00
Tax on Income at 20%	(316,960.00)	(558,560.00)
Net Income	1,328,740.00	2,295,140.00
EPS	1.30	1.40
= Net Income - Preferred Dividned	$                            1,645,700.00	$                            2,853,700.00
Weightage Average Shares Outstanding	$                            1,268,133.33	$                            2,041,900.00