Question

13+1 mark for EPS and 1 Wang Corporation's capital structure consists of 45,000 ordinary preferred dividend totaling 5,400 $. At Decembe and discussions with company officials reveal consists of 45,000 ordinary shares outstanding and totaling 5,400 $. At December 31, 2019 an analysis of the accounts with company officials revealed the following information: Sales Sales discount Loss on discontinued operations (net of tax) Selling expenses Cash Accounts receivable Share capital Accumulated depreciation Dividend revenue Unearned service revenue Accrued interest payable Land Patents Retained earnings, January 1, 2019 Interest expense General and administrative expenses Dividends declared Cost of goods sold Allowance for doubtful accounts Notes payable (maturity 7/1/22) Machinery and equipment Materials and supplies Accounts payable Income tax expenses $ 1,100,000 50,000 28,000 128,000 60,000 90,000 200,000 180,000 8,000 4,400 1,000 370,000 100,000 290,000 17,000 150,000 29,000 651,000 5,000 200,000 450,000 40,000 60,000 33,600 Instructions: 1- Prepare a multiple step income statement for Wang Corporation at December 2019. 2- Compute earnings per share (EPS) and interpret the result.

Answer 1

Wang Corporation

Multi Sep Income Statement at December 31, 2019

Sales $1,100,000

Cost of Good Sold 651,000

Gross Profit 449,000

Operating Expenses

Selling Expenses

Sales discount 50000

Selling expenses 128,000 178,000

Administrative Expenses

General and administrative expenses 150,000 150,000

Total Operating Expenses 328,000

Operating Income (449,000 - 328,000) 121,000

Non- operating or other

Dividend revenue 8,000

Loss on discounted operation (28,000)

Interest expenses (17,000)

Total Non - Operating (37,000)

Net Income (121,000 - 37,000) 84,000

Now lets talk about EPS (Earning per share)

EPS is the amount of net income earned per share of stock outstanding.

EPS = Net Income - Preferred Dividend / No of share outstanding

= 84000 - 5400 / 45,000

= 1.75

Analysis

Higher earning per share is always better than lower earning per share. Higher earning per share shows company has more profits to distribute to its shareholders.