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For the year ended December 31, Southern Supply had net sales of $7,220,000, costs and other...

For the year ended December 31, Southern Supply had net sales of $7,220,000, costs and other expenses (including income tax) of $6,010,000, and a gain from discontinued operations (net of income tax) of $420,000. a. Prepare a condensed income statement (including earnings per share), assuming that 910,000 shares of common stock were outstanding throughout the year. b. Which earnings per share figure would you recommend be used to compute the price-earnings ratio for Southern Supply?

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Answer #1
a
Income Statement
For the Year Ended December 31, Current year
Net sales 7220000
Less: Costs and expenses 6010000
Income before continuing operations 1210000
Discontinued operations, net of income tax 420000
Net Income 1630000
Earnings per share:
Income from continuing operations 1.33 =1210000/910000
Discontinued operations, net of income tax 0.46 =420000/910000
Net Income 1.79
b
EPS on earnings from continuing operations should be used.
The $1.33 earnings per share from continuing operations.
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