Earnings per Share and Extraordinary Items (Appendix) The Stockholders\' Equity

Question

Earnings per Share and Extraordinary Items (Appendix)

The Stockholders' Equity section of the balance sheet for Lahey Construction Company at the end of 2014 is as follows:

The lower portion of the 2014 income statement indicates the following:

Assume that the number of shares outstanding did not change during the year.

Required:

1. Compute earnings per share before extraordinary items. Round your answer to the nearest cent.
$ per share

2. Compute earnings per share after the extraordinary loss. Round your answer to the nearest cent.
$ per share

8%, $10 par, cumulative preferred stock, 500,000 shares authorized, 181,000 shares issued and outstanding $1,810,000 Additional paid-in capital on preferred 6,787,500 Common stock, $1 par, 2,500,000 shares authorized, 1,267,000 shares issued and outstanding 1,267,000 Additional paid-in capital on common 17,357,900 Retained earnings 25,429,000 Total Stockholders' Equity 52,651,400

Explanation / Answer

The total number of available, issued and outstanding shares are 1,267,000

(a)Net income befire extraordinary loss is $5,764,800.

Hence earnings per share will be 5764800/1267000 = $4.55 per share

(b) After extraordinary loss , the income is $2,152,200

Hence EPS is 2152200/1267000 = $1.698 = $1.70 per share

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