Question

#8

Net income for 2020 reflects a total effective tax rate of 20%. Included in the net income figure is a loss of $18,720,000 (before tax) as a result of a non-recurring major casualty. Preferred stock dividends of $374,400 were declared and paid in 2020. Dividends of $1,040,000 were declared and paid to common stockholders in 2020.

Compute earnings per share data as it should appear on the income statement of Sunland Corporation. (Round answers to 2 decimal places, e.g. 1.48.)

The stockholders' equity section of Sunland Corporation appears below as of December 31, 2020. 8% preferred stock, $50 par value, authorized 103,600 shares, outstanding 93,600 shares Common stock, $1.00 par, authorized and issued 10,400,000 shares Additional paid-in capital Retained earnings Net income $4,680,000 10,400,000 21,320,000 $139,360,000 34,320,000 173,680,000 $210,080,000

Answer 1

Earning per share = Income available to common shareholders / Common stock shares
To Calculate the income available to common shareholders:
Particulars	Amount ($)
Net income	$ 34,320,000
less: Dividends on preferred stock	($ 374,400)
(8% of $ 4,680,000 )
Income available to common shareholders	$ 33,945,600
Common stock shares = 10,400,000 shares
Earning per share = Income available to common shareholders / Common stock shares
Earning per share = $ 33,945,600 / 10,400,000 shares
Earning per share = $ 3.26 per share ( rounded to 2 decimal )