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

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:

11%, $10 par, cumulative preferred stock, 500,000 shares authorized, 188,000 shares issued and outstanding $1,880,000 Additional paid-in capital on preferred 7,200,400 Common stock, $1 par, 2,500,000 shares authorized, 1,364,000 shares issued and outstanding 1,364,000 Additional paid-in capital on common 17,868,400 Retained earnings 25,540,000 Total Stockholders' Equity 53,852,800

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

Net income before tax $9,811,000 Income tax expense (40%) (3,924,400) Income before extraordinary items $5,886,600 Extraordinary loss from flood $(6,156,000)      Less related tax effect (40%) 2,462,400 (3,693,600) Net income $2,193,000

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

Explanation / Answer

Amount Net Income before extraordinary items $58,86,600 Less: Preference Dividend $ 206,800 Net Income after Prefence dividend before extraordinary items $56,79,800 No of Equity Shares Outstanding 13,64,000 Earnings Per share before Extraordinary items $4.16 Amount Net Profit after Extraordinary Items 21,93,000 Less: Preference Dividend $206,800 Net Profit available to Equity Shareholders $19,86,200 Number of Equity Shares Outstanding $13,64,000 EPS after teh extraordinary loss $1.46 per share

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