Question

At December 31, 2016, Teal Corporation had the following stock outstanding. 10% cumulative preferred stock, $100 par, 108,560 shares $10,856,000 Common stock, $5 par, 4,041,000 shares 20,205,000 During 2017, Teal did not issue any additional common stock. The following also occurred during 2017. Income from continuing operations before taxes $22,700,000 Discontinued operations (loss before taxes) $3,255,000 Preferred dividends declared $1,085,600 Common dividends declared $2,230,000 Effective tax rate 35 % Compute earnings per share data as it should appear in the 2017 income statement of Teal Corporation. (Round answers to 2 decimal places, e.g. 1.48.)

Answer 1

TEAL CORPORATION

INCOME STATEMENT

DECEMBER 31, 2014

Net income:

Income from continuing operation before income tax 22,700,000

Income tax (35% * 22,700,000) 7,945,000

Income from continuing operations 21,905,500

Discontinued operations

Loss before taxes $3,255,000

Less applicable income tax (35%) 1,128,750 2,096,250

Net income 19,809,250

Preferred dividends declared $1,085,600

Weighted average common shares outstanding 4,041,000

Earnings per share:

Income from continuing operations

($21,905,500 - $ 1,085,600 )/ 4,041,000 21,905,499

Discontinued operations, net of tax

($2,096,250/4,041,000) 0.51

Net income

($19,809,250- $1,085,600)/4,041,000 19.7