Exercise 16-20 On January 1, 2017, Flounder Industries had stock outstanding as follows. 6% Cumulative preferred...

Exercise 16-20

On January 1, 2017, Flounder Industries had stock outstanding as follows.

6% Cumulative preferred stock, $100 par value, issued and outstanding 10,300 shares $1,030,000

Common stock, $10 par value, issued and outstanding 188,000 shares 1,880,000

To acquire the net assets of three smaller companies, Flounder authorized the issuance of an additional 162,000 common shares. The acquisitions took place as shown below.

Date of Acquisition Shares Issued

Company A April 1, 2017 50,400

Company B July 1, 2017 80,400

Company C October 1, 2017 31,200

On May 14, 2017, Flounder realized a $88,800 (before taxes) insurance gain on discontinued operations.

On December 31, 2017, Flounder recorded income of $285,600 from continuing operations (after tax).

Assuming a 50% tax rate, compute the earnings per share data that should appear on the financial statements of Flounder Industries as of December 31, 2017. (Round answer to 2 decimal places, e.g. $2.55.)

Expert Solution

	Dates	Shares	Fraction	Weighted
Shares Outstanding	1/1/2017	188000	0.25	47000
Issued Shares	1/4/2017	50400
		238400	0.25	59600
Issued Shares	1/7/2017	80400
		318800	0.25	79700
Issued Shares	1/10/2017	31200
		350000	0.25	87500

Weighted average outstanding shares = 87500

Net Income			$285,600
Preferred Dividends			61800	(1030000*6%)
Income available to Common Stockholders			$223,800

Flounder Industries
Income Statement (Partial)
For the month ended December 31, 2017

Income before extraordinary item	$223,800
Extraordinary item, net of tax	44400
(88800*50%)
Net Income	$268,200

Earnings Per Share

Income before extraordinary item	3.07	268200/87500
Extraordinary item, net of tax	0.51	44400/87500
Total Earnings Per Share	3.57

ekkarill92 answered 1 year ago

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