Question

Earnings per share, discontinued operations The net income reported on the income statement of Cutler Co. was $1,490,000. There were 50,000 shares of $20 par common stock and 20,000 shares of $3 preferred stock outstanding throughout the current year. The income statement included a gain on discontinued operations of $180,000 after applicable income tax. a. Determine the per-share figures for common stock for income before discontinued operations. Round your answer to the nearest cent. $fill in the blank 1 per share b. Determine the per-share figures for common stock for net income. Round your answer to the nearest cent. $fill in the blank 2 per share

Answer 1

The per-share figure for common stock income before discontinued operations is $26.20, and the per-share figure for common stock net income is $29.80.

Step-by-step explanation:

The question requires calculating per-share figures for common stock for both income before discontinued operations and net income. We have a net income of $1,490,000 with a gain from discontinued operations of $180,000 included in this amount. Assuming the preferred stock does not participate in the earnings of the company, we would only consider the common shares which are 50,000.

To calculate income before discontinued operations per share for common stock:
Subtract the gain from discontinued operations from the net income:
$1,490,000 (net income) - $180,000 (gain from discontinued operations) = $1,310,000 (income before discontinued operations).
Divide by the number of common shares:
$1,310,000 / 50,000 shares = $26.20 per share.

To calculate net income per share for common stock:
Simply divide the reported net income by the number of common shares:
$1,490,000 / 50,000 shares = $29.80 per share.