Both outstanding. On January 1, 20X2, the firm issued 120,000 new shares. Becaus
ID: 2340831 • Letter: B
Question
Both outstanding. On January 1, 20X2, the firm issued 120,000 new shares. Because of the proceeds from these new shares and other operating improvements, earnings after taxes increased by 30 percent. (5 points) a. Compute earnings per share for the year 20XI. b. Compute earnings per share for the year 20X2. 3. Frantic Fast Foods had earnings after taxes of $480.000 in the year 20XI with 300,000 shares Earnings after taxes Earnings per sharShares outstanding 4. Classify the following balance sheet items as current or noncurrent: (5 Points) Retained earnings Accounts payable Prepaid expenses Plant and equipment Inventory Common stock Bonds payable Accrued wages payable Accounts receivable Capital in excess of par Preferred stock Marketable securitiesExplanation / Answer
ANSWER
A)
For Year 2011
Earnings after taxes for 2011 = $4,80,000
No of Shares Outstanding = 3,00,000 shares
Earning Per Share = Earnings after taxes/No of shares Outstanding
= $4,80,000/3,00,000 = $ 1.6/Share
For Year 2012
Earnings after taxes for 2012 ( With 30 % Improvement in Earnings) = $4,80,000 + 30% = $ 624000
No of Shares Outstanding ( With New Issue) = 3,00,000+120000= 420000 shares
Earning Per Share = Earnings after taxes/No of shares Outstanding
= $6,24,000/4,20,000 = $ 1.4857/Share
B) 1. Retained Earnings is non current Liabilities because these are of company which company uses in long run
2. Account Payable is Current Liabilities Because it is usually paid within 1 year
3. Prepaid Expenses is a current asset because the expenses paid is generally of 1 year
4. Plant and Equipment is a Non Current Asset or Fixed Asset beacuse it is not liquid in nature i.e it cannot be easily converted in cash
5. Inventory is a Current Asset beacuse it is liquid in nature i.e it can be easily converted in cash in a year
6. Common Stock is a Current Asset beacuse it is highly liquid in nature i.e it can be easily converted in cash in a year but a company may hold then it is non current.
7. Bonds Payable that mature within 1 year considered as current liability otherwise non current liability
8. Accrued wages payable is Current Liabilities Because it is usually paid within 1 year
9. Account Receivable is a current Asset beacuse the company generally receives cash from debtors within 1 year
10.Capital in excess of par is a non current beacuse it is for long time in nature in tghe company beacause of the shareholders money investment in the company
11. Preferred Stock is a non current because it is not generally converted into cash within a year
12. Marketable Securities is a current asset because it is liquid in nature i.e it can be easily converted in cash in a year
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