On January 1, 2012, Bailey Industries had stock outstanding as follows. 6% Cumul
ID: 2382310 • Letter: O
Question
On January 1, 2012, Bailey Industries had stock outstanding as follows.
issued and outstanding 10,400 shares
$1,112,800 Common stock, $12 par value, issued and
outstanding 237,600 shares 2,851,200 On January 1, 2012, Bailey Industries had stock outstanding as follows. To acquire the net assets of three smaller companies, Bailey authorized the issuance of an additional 236,400 common shares. The acquisitions took place as shown below. On May 14, 2012, Bailey realized a $129,600 (before taxes) insurance gain on the expropriation of investments originally purchased in 2000. On December 31, 2012, Bailey recorded net income of $369,600 before tax and exclusive of the gain. Assuming a 42% tax rate, compute the earnings per share data that should appear on the financial statements of Bailey Industries as of December 31, 2012. Assume that the expropriation is extraordinary. (Round answer to 2 decimal places, e.g. $2.55.)
Explanation / Answer
Net income from continuing operation before income tax: 369,600
Income tax expense: 369,600 * 42% = 155,232
Net income before extraordinary item: 369,600 - 155,232 = 214,368
Extraordinary gain (net of tax): 129,600 * (100% - 42%) = 75,168
Net income: 214,368 + 75,168 = 289,536
Preferred dividend: 1,112,800 * 6% = 66,768
Income allocatable to common, before extraordinary: 214,368 - 66,768 = 147,600
Income allocatable to common, after extraordinary: 289,536 - 66,768 = 222,768
Number of common outstanding, weighted average: 368,700 shares
237,600 * 12/12 = 237,600
88,800 * 9/12 =?66,600
110,400 * 6/12 =?55,200
37,200?* 3/12 =?9,300
Total????????368,700
EPS before extraordinary: 147,600 / 368,700 = .40
EPS after extraordinary: 222,768 / 368,700 = 0.60
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