P16-9B (EPS with Stock Dividend and Extraordinary Items) Pawner


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P16-9B (EPS with Stock Dividend and Extraordinary Items) Pawner Corporation is preparing the comparative financial statements to be included in the annual report to stockholders. Pawner employs a fiscal year ending October 31. Income from operations before income taxes for Pawner was $,3,750000 and $3,200,000, respectively, for fiscal years ended October 31, 2015 and 2014. Pawner experienced an extraordinary loss of $600,000 because of an earthquake on June 6, 2014. A 40% combined income tax rate pertains to any and all of Pawner Corporation’s profits, gains, and losses. Pawner’s capital structure consists of preferred stock and common stock. The company has not issued any convertible securities or warrants and there are no outstanding stock options. Pawner issued 100,000 shares of $100 par value, 4% cumulative preferred stock in 2009. All of this stock is outstanding, and no preferred dividends are in arrears. There were 2,000,000 shares of $1 par common stock outstanding on November 1, 2013. On Febraury 1, 2014, Pawner sold an additional 600,000 shares of the common stock at $24 per share. Pawner distributed a 15% stock dividend on the common shares outstanding on December April 1, 2015. These were the only common stock transactions during the past 2 fiscal years. Instructions (a) Determine the weighted-average number of common shares that would be used in computing earnings per share on the current comparative income statement for: (1) The year ended October 31, 2014. (2) The year ended October 31, 2015. (b) Starting with income from operations before income taxes, prepare a comparative income statement for the years ended October 31, 2015 and 2014. The statement will be part of Pawner Corporation’s annual report to stockholders and should include appropriate earnings per share presentation. (c) The capital structure of a corporation is the result of its past financing decisions. Furthermore, the earnings per share data presented on a corporation’s financial statements is dependent upon the capital structure. (1) Explain why Pawner Corporation is considered to have a simple capital structure. (2) Describe how earnings per share data would be presented for a corporation that has a complex capital structure momsboss5
posted a question · Apr 01, 2015 at 11:32pm

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