Question

The following information is related to Stellar Company for 2017.

Retained earnings balance, January 1, 2017		$981,230
Sales Revenue		26,181,600
Cost of goods sold		16,144,500
Interest revenue		71,400
Selling and administrative expenses		4,762,000
Write-off of goodwill		836,600
Income taxes for 2017		1,343,100
Gain on the sale of investments		117,400
Loss due to flood damage		395,000
Loss on the disposition of the wholesale division (net of tax)		449,000
Loss on operations of the wholesale division (net of tax)		97,610
Dividends declared on common stock		229,300
Dividends declared on preferred stock		81,500

Stellar Company decided to discontinue its entire wholesale operations (considered a discontinued operation) and to retain its manufacturing operations. On September 15, Stellar sold the wholesale operations to Rogers Company. During 2017, there were 463,400 shares of common stock outstanding all year.

Income Tax 1343100 Income from Continuing Operations 2889200 Discontinued Operations Loss on Disposal, Net of Tax 449000 Loss on Operations, Net of Tax 97610 546610 2342590 Net Income/ (Loss) Earnings Per Share Income from Continuing Operations 9.13 Discontinued Operations Loss on Disposal, Net of Tax 0.97 Loss on Operations, Net of Tax 0.21 1.18 5.06 Net Income/ (Loss)

I only need to modify two places.

income from continuing opeartations and net income. please give me equation? thank you

Answer 1

Answer

• All working forms part of the answer
• First wrong figure is under Earning per Share section: “Income from Continuing Operations”

Income from Continuing Operations = $ 2,889,200 (less) Preferred stock dividend $ 81,500 = $ 2,807,700

Total common stock shares outstanding = 463,400 shares

Earning per share amount for “ Income from Continuing Operations” = $ 2,807,700 / 463,400 shares = 6.0589…..

Hence, correct figure = $ 6.06

• Second wrong figure is under Net Income/(Loss) figure of Earning per shares.

Net Income / (Loss) = $ 2,342,590

Preference Stock Dividend = $ 81,500

Earnings available for Common Stock holders = $ 2,342,590 – $ 81,500 = $ 2,261,090

Earning per share = $ 2,261,090 / 463,400 shares outstanding = 4.879348….

Hence, correct figure = $ 4.88