Question

A portion of the combined statement of income and retained earnings of Culver Inc. for the current year follows.

Income before extraordinary item

$14,960,000

Loss from discontinued operations, net of applicable income tax (Note 1)

1,370,000

Net income

13,590,000

Retained earnings at the beginning of the year

82,330,000

95,920,000

Dividends declared:

On preferred stock—$6.00 per share

$282,000

On common stock—$1.75 per share

14,770,000

15,052,000

Retained earnings at the end of the year

$80,868,000

Note 1. During the year, Culver Inc. suffered a major loss from discontinued operations of $1,370,000 after applicable income tax reduction of $1,190,000.

At the end of the current year, Culver Inc. has outstanding 8,520,000 shares of $10 par common stock and 47,000 shares of 6% preferred. On April 1 of the current year, Culver Inc. issued 980,000 shares of common stock for $33 per share to help finance the loss from discontinued operations.

Compute the earnings per share on common stock for the current year as it should be reported to stockholders. (Round answer to 2 decimal places, e.g. $2.55.)

Income Statement

	$
	$
	$

Answer 1

Given
Income before extraordinary item		$14,960,000
Extraordinary loss, net of applicableincome tax (Note 1)		$1,370,000
Net income		$13,590,000
Retained earnings at the beginning of the year		$82,330,000
		$95,920,000
Dividends declared:
On preferred stock—$6.00 per share	$282,000
On common stock—$1.75 per share	$14,770,000	$15,052,000
Retained earnings at the end of the year		$80,868,000
Income before extraordinary item		$14,960,000
Less: 6% preferred stock—$6.00 per share		$282,000
Common stock income before extraordinary item		$14,678,000
Less: extraordinary loss, net of tax		$1,370,000
Net income available for common stockholders		$13,308,000
Weighted-average number of shares outstanding		8,275,000
EPS		$1.61
Dates	Share Outstanding	Fraction of Year	Weighted shares
January 1–April 1	7,540,000	3/12	1,885,000
April 1–December 31	8,520,000	9/12	6,390,000
Weighted-average number of shares outstanding			8,275,000