Question

eBook Show Me How Calculator Effect of Financing on Earnings per Share Domanico Co., which produces and sells biking equipment, is financed as follows: Bonds payable, 10% (issued at face amount) $450,000 Preferred $1 stock, $10 par 450,000 Common stock, $25 par 450,000 TITITI Income tax is estimated at 40% of income. Determine the earnings per share on common stock, assuming that the income before bond interest and income tax is (a) $175.500. (b) $220,00, and ($265.500 Enter answers in dollars and cents, rounding to two decimal places. a. Earnings per share on common stock b. Earnings per share on common stocks c. Earnings per share on common stock 5 Ch 14 Homework Content Area Check Mr Work Remember to take interest income tax and dividends into consideration,

Answer 1

Number of common stock = Total Value of common stocks / Stock value per share $450000 / $25 18,000 shares Statement showing Earnings per common stock Options Particulars (a) (b) Income before Interest and tax $ 1,75,500 $ 2,20,500 $ less: Interest on bonds (10% of $450000) $ 45,000 $ -45,000 $ Income before tax 1,30,500 $ 1,75,500 $ less: Tax @ 40% $ 52,200 $ -70,200 Income after Tax $ 78,300 $ 1,05,300 $ less: Dividend to preferred stock $1 -45,000 $ -45,000 $ Earnings to Common stocks (a) 33,300 $ 60,300 $ Number of Common stock (b) 18,000 18,000 Earnings per common stock (a/b) $ 1.85 $ 3.35 $ (c) 2,65,500 45.000 2,20,500 -88,200 1,32,300 45,000 87,300 18,000 4.85 1.85 Solution : a. Earnings per share on common stock b. Earnings per share on common stock c. Earnings per share on common stock $ $ 3.35 4.85

In case of any issues or doubts, please comment below