Question

Exercise 2-3 Required: Compute 2014 earnings per share. (Extreme Edge had 50,000 shares of stock outstanding in 2014). The various income categories mentioned above result from Extreme Edge's income statement presentation method. As noted, the Internet firm reported four expense categories, each of which resulted in a measure of profit (e.g., gross profit, income from continuing operations, pretax income, and net income). Managers refer to this type of disclosure as a multiple-step income statement. Conversely, a single-step income statement first reports all categories of revenues and gains, and then subtracts all expenses and losses from them to determine pretax income. While GAAP allows either method, managers find the multiple-step format more informative and often recast single-step income statements into multiple-step ones. Cost of goods sold (cost of sales) is the historical cost of inventory sold during a reporting period. Merchants and manufacturers deduct their cost of sales from sales revenues to determine gross profit (gross margin or gross profit margin). Extreme Edge's gross profits were $400,000 in 2012 and $540,000 in 2013. Apart from its cost of goods sold, Extreme Edge's other expenses consist of operating expenses (sometimes called selling, general and administrative, or SG&A, expenses). Deducting these recurring expenses from gross profit determines income from continuing operations (or operating income). This income number represents earnings from core business activities. Our Internet merchant made income from continuing operations of $55,000 from selling merchandise in its second year of business (2013). Other revenues (and gains) and expenses and losses) change income, but do not affect operating income. The most prominent item in this category is interest on borrowed funds. Extreme Edge incurred a $20,000 interest (financial) expense in 2013, which represented interest on borrowed funds (i.e., notes payable).' Adjusting operating income for non-operating expenses and revenues) produces income before taxes or (pretax income). Governments tax these earnings on a percentage basis, producing income tax expense (provision for income tax). Extreme Edge's tax rate was 40% for each year reported, as derived by dividing income tax expense by pretax earnings. In 2012, for example, we compute the income tax rate as follows: $22,000/S55,000 = 40%.

Answer 1

calculation of earnings The problem is based on рея #base (eps) » оч - attributable to calliity shares Earnings per share - Net income beighted average shales outstanding. 9 Tricolo Net income attributable to carcity share holders G) = net income caffertanw – preferred dividendo Since in the given problem there is no 6-) preferred stock outstanding, total net income after tan will be attributable to caruity share holders. → It is given in the problem that the total carcity shares outstanding for the year 2014 & 50006 shapes. → In 2014, cash dividend of $2000 has been paid to eacuity shase holders since the dividend paid to earuity shale holders forms part of the Earnings attributable to carcity shares, it should be included in Eps calculation mobi Dogos song ako

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