The stockholders\' equity section of Tkachuk Corporation appears below as of Dec

Question

The stockholders' equity section of Tkachuk Corporation appears below as of Dec 31, 2008. 8% preferred stock, $50 par value, authorized 4,500,000 100,000 shares, outstanding 90,0000 shares 10,000,000 Common stock, $1 par authorized & issued 10 million shares 20,500,000 Additional paid-in capital 134,000,000 Retained earnings 33,000,000 167,000,000 Net Income $202,000,000 Net income for 2008 reflects a total effective tax rate of 34%. Included in the net income figure is a loss of $18,000,000 (before tax) as a result of major casualty, which should be classified as an extraordinary item. Preferred stock dividends of $360,000 were declared in 2008. Dividends of $1,000,000 were declared and paid to to common stockholders in 2008. Directions: Compute earnings per share data as it should appear on the income statement of Tkachuk Corporation.

Explanation / Answer

Computation of net income: 2008 net income after tax 2008 net income before tax {$ 33,000,000/ (1 - .34)} Add back major casualty loss Income from operations Income taxes (34% x 68,000,000) Income before extraordinary item Extraordinary item: Casualty loss Less applicable income tax reduction Net income $ 33,000,000 50,000,000 18,000,000 68,000,000 23,120,000 44,880,000 $ 18,000,000 6,120,000 Net income Less provision for preferred dividends (8% of $ 4,500,000) Income available for common Common shares Earnings per share 33,000,000 360,000 32,640,000 10,000,000 $ 3.26 Income statement presentation Per share of common stock: Income before extraordinary item Extraordinary item (net of tax) Net income a $ 44,880,000 360,000 10,000,000 =$ 4.45 11,880,000 33,000,000 $ 4.45a (1.19)b $ 3.26 b $ 11,880,000 10,000,000 = $ 1.19

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