1 answer

At December 31, 2019, Splish Corporation had the following stock outstanding. 10% cumulative preferred stock, $100...

Question:

At December 31, 2019, Splish Corporation had the following stock outstanding.

10% cumulative preferred stock, $100 par, 107,532 shares $10,753,200
Common stock, $5 par, 4,053,980 shares 20,269,900

During 2020, Splish did not issue any additional common stock. The following also occurred during 2020.

Income from continuing operations before taxes $24,726,300
Discontinued operations (loss before taxes) $3,413,600
Preferred dividends declared $1,075,320
Common dividends declared $2,228,300
Effective tax rate 35 %

Compute earnings per share data as it should appear in the 2020 income statement of Splish Corporation. (Round answers to 2 decimal places, e.g. 1.48.)

Earnings Per Share

Income from Continuing Operations

$enter a dollar amount

Discontinued Operations

enter a dollar amount

Net Income / (Loss)

$enter a total amount


Answers

Solution:

Earnings per Share = Common dividends declared / No. of Common stock outstanding

                                     = $2,228,300 / 4,053,980

                                     = $0.55

Income from Continuing Operations =

                                         Income from continuing operations before taxes * (1 – Effective tax rate)

                                = $24,726,300 * (1 – 35%)

                                = $24,726,300 * 0.65

                                = $16,072,095

Income/loss from discontinued Operations =

                                                Discontinues operations (loss before taxes) * (1 – Effective tax rate)

                                = - $3,413,600 * (1 – 35%)

                                = - $3,413,600 * 0.65

                                = - $2,218,840

Earnings Per Share

$ 0.55

Income from Continuing Operations

$ 16,072,095

Discontinued Operations

- $ 2,218,840 (loss)

Net Income / (Loss)

$ 13,853,255

.

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