Question

Assume that income from continuing operations (net of tax) is $50,000, what is the amount of Earnings Per Share reported for discontinued operations?

Using the information below, determine the number indicated above to be reported on the income statement, the statement of comprehensive income, or the retained earnings statement for the year ended Dec. 31, 2020

Assume a 30% tax rate on all items and that 100,000 shares of common stock were outstanding during the year.

All amounts except for the beginning retained earnings balance are pre-tax numbers.

Retained Earnings                                                                                                                    $550,000

Net Sales                                                                                                                                 1,300,000

Selling expenses 200,000

Earthquake loss on plant (unusual and infrequent) 280,000

Cash Dividends declared on common stock 33,000

Cash Dividends declared on preferred stock 12,000

Cost of goods sold 780,000

Gain resulting from computation error on depreciation charge in 2015 510,000

Dividend revenue 60,000

Administrative expenses 40,000

Unrealize holding loss on available for sale securities 30,000

Gain on disposal of a component 100,000

Answer 1

Earnings per share = (Income after tax - preferred commonstock dividend) / No. of Shares of common stock

Given No of Shares of common stock = 100000

Preferred commonstock dividend = 12000

For calculating Income after tax retained earnings Statement Is as Follows

Retained Earnings Statement for the year ended 31st December, 2020:

Particulars	Amount ($)
Revenue:
Sales	1300000
Dividend Received	60000
Gain on disposal of component	100000
Total Revenue (A)	1460000
Expenses:
Cost Of Goods Sold	780000
Selling Expenses	200000
Administrative Expenses	40000
Loss on Securities	30000
Total Expenses (B)	1050000
Income (A – B)	410000
Less: tax @30%	123000
Income after Tax	287000
Appropriation of Items
Dividend to Common stock	33000
Dividend to Preferred stock	12000
Net income after appropriation	242000

Statement of comprehensive income for the year ended 31st December, 2020:

Particulars	Amount ($)
Income after tax and appropriation	242000
Earthquake loss	(280000)
Gain on depreciation of earlier years (2015)	510000
Total comprehensive income	472000

Thus ,

Earnings per share (EPS)= (Income after tax - preferred commonstock dividend) / No.of Shares of common stock

EPS = (287000 - 12000) / 100000

= 275000 / 100000

= $2.75

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