Question

The shareholders’ equity section of Concord Corporation as at December 31, 2020, follows:

10% cumulative preferred shares, 100,000 shares authorized, 86,000 shares outstanding		$4,400,000
Common shares, 10 million shares authorized and issued		10,000,000
Contributed surplus		10,800,000
		25,200,000
Retained earnings		177,000,000
		$202,200,000

Net income of $25 million for 2020 reflects a total effective tax rate of 26%. Included in the net income figure is a loss of $18 million (before tax) relating to the operations of a business segment that is to be discontinued.

Calculate earnings per share information as it should appear in the financial statements of Concord Corporation for the year ended December 31, 2020. (Round answers to 2 decimal places, e.g. 52.75.)

		Earnings per share
Continuing Operations		$enter a dollar amount rounded to 2 decimal places
Discontinued Operations		enter a dollar amount rounded to 2 decimal places
Net Income / (Loss)		$enter a total amount

Answer 1

Earning Per Share:

Net Income (loss) EPS

= (Net Income - Preferred Dividends) / Weighted Average Common Shares Outstanding

= ($25,000,000 - $440,000) / 10,000,000

= $24,560,000 / 10,000,000

= $2.456

Continuing Operation EPS

= Income from continuing operations / Weighted Average Common Shares Outstanding

= ($25,000,000 + $13,320,000 - $440,000) / 10,000,000

= $37,880,000 / 10,000,000

= $3.788

Discontinuing Operation EPS

= $13,320,000 / 10,000,000

= $1.332

Working note:

Net Income = $25,000,000

Preferred Dividends (10% of $4,400,000) = $440,000

Weighted average common shares outstanding = 10,000,000

Discontinued operations:

Loss before tax $18,000,000

Less: Applicable Income Tax (26%) ($4,680,000)

$13,320,000