Question

Vaughn 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 $1,819,000 and income from continuing operations for the fiscal year ended May 31, 2021, was $2,469,000. In both years, the company incurred a 10% interest expense on $2,394,000 of debt, an obligation that requires interest-only payments for 5 years. The company experienced a loss from discontinued operations of $620,000 on February 2021. The company uses a 20% effective tax rate for income taxes. The capital structure of Vaughn Corporation on June 1, 2019, consisted of 986,000 shares of common stock outstanding and 20,600 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, Vaughn sold an additional 483,000 shares of the common stock at $20 per share. Vaughn distributed a 20% stock dividend on the common shares outstanding on January 1, 2020. On December 1, 2020, Vaughn was able to sell an additional 832,000 shares of the common stock at $22 per share. These were the only common stock transactions that occurred during the two fiscal years. Identify whether the capital structure at Vaughn Corporation is a simple or complex capital structure. Simple Capital Structure Determine the weighted-average number of shares that Vaughn Corporation would use in calculating earnings per share for the fiscal year ended: Weighted-average number of shares (1) May 31, 2020 1430417 (2) May 31, 2021 2178800

Prepare, in good form, a comparative income statement, beginning with income from operations, for Vaughn Corporation for the fiscal years ended May 31, 2020, and May 31, 2021. This statement will be included in Vaughn's annual report and should display the appropriate earnings per share presentations. (Round earnings per share to 2 decimal places, e.g. $1.55.) VAUGHN CORPORATION Comparative Income Statement For Fiscal Years Ended May 31, 2020 and 2021 2020 2021 All Earnings per share: $

Answer 1

Answer:- Summarized the information provided in the question, vaughn cooporation; Q-1 The capital structure of Vaughn coop.. is a simple as it has only issued common stock and preferred stock shases in the Complex capital structure company also have the dilutive securities like convertible securities, options of waxacint, in addition to this the Companies with simple structure arbe only required to report basic Eps whereas in complex capital structurre also need to with DILUTED BASIC -2 For may 31,2020. weighted average ho. of shares – 14,30,417 working Date no of shares calculation weighted aug ho. of shares 1-June 9,86,000 9,86, 000X 9,86,000 19/12 1 - Oct 4,83.000 4,83,00x 3,22,000 2019 report Eps 2019 12 11 - Jan 2,93,800 2020 (9.86,000 +483, 000)x200 1. 2,93,800x 5/12 12,2417 Total 17,,62,800 1,43,0417

11 June 2020 for may 2021, weighted average no of sharoes = 21,78,800 working Date Ino of shortes Calculation weighted aug no of shares 17,62,800 1769800x12/12 17,62,800 1. Dec 2020 832,000 839,000+ 6%/ 4,16,000 Total 25, 94,800 21,78,800 Note: Vaughn Coop, distributed a 20-8. stock dividend on common shares outstanding Jan-1 2020 - *no. of shorres issued as stock dividend (986000+ 483000)* 20% = 2,93,800. 9-3: Summary: Particularos 2020 202) obet income available to common 19,01850 13.25,854 stock holders The weighted average 114,30,40 2178,800 no. of shares | Earnings per shares ($) 0.84 as on а a 0.56

wooking: Vaughn Corporation fiscal Comparative Income statement for Year Ended may 31 ,2020 & 2021 Paoticulares workings 2020 | continuing (disontnu'ng Total operations Operations Income froma 18190002,469000 (620,000)/1849000 202) 139400 115,76,600 16,09, '600 321920 net income 12, 87, 680 61800 operation Interest © 2,394,000 2,39,400 expenses x 10'1. Income before tax Tax on n@ Ox20 (4315,920 Hotal income @ 12,63650 I closs) @ Divident of 20600 x$50x60%. Tnet income after dividend @ 12,01,8801 of preferbed stock ② weighted lang no. of preferred & shares 61,800 stock 12,25,850 Tsee solu/14,30 121,98,800 Ilion- 2417 Isharesh Earning per share 0.56 010 0.84 (EP)

Note: xDivided on cumulative preferred stock can be deducted even if no dividend is distributed for the year. * Dividend on non- Cumulative preference stock can be deducted only when made. is payment
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