Effect of Financing on Earnings per Share Domanico Co., which produces and sells biking equipment, is...
Effect of Financing on Earnings per Share Domanico Co., which produces and sells biking equipment, is financed as follows: Bonds payable, 10% (issued at face amount) $2,250,000 Preferred $1 stock, $10 par 2,250,000 Common stock, $25 par 2,250,000 Income tax is estimated at 40% of income. Determine the earnings per share on common stock, assuming that the income before bond interest and income tax is (a) $990,000, (b) $1,215,000, and (c) $1,440,000. Enter answers in dollars and cents, rounding to two decimal places.
nter answers in dollars and cents, rounding to two decimal places.
a. Earnings per share on common stock $
b. Earnings per share on common stock $
c. Earnings per share on common stock $
Homework Answers
Calculate earning per share
| a | b | c | |
| Income before interest and tax | 990000 | 1215000 | 1440000 |
| Interest expense (2250000*10%) | -225000 | -225000 | -225000 |
| Income before tax | 765000 | 990000 | 1215000 |
| Less: Income tax @40% | -306000 | -396000 | -486000 |
| Net income | 459000 | 594000 | 729000 |
| Less: Preferred dividend | -225000 | -225000 | -225000 |
| Earning for common shareholders | 234000 | 369000 | 504000 |
| Outstanding shares (2250000/25) | 90000 | 90000 | 90000 |
| Earning per share on Common Stock | 2.60 | 4.10 | 5.60 |
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Effect of Financing on Earnings per Share Domanico Co., which produces and sells biking equipment, is...
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