The net income reported on the income statement of Ground HogCo. was $1,250,000.

Question

The net income reported on the income statement of Ground HogCo. was $1,250,000. There were 250,000 shares of $40 parcommon stock and 50,000 shares of $10 preferred stock out standingthroughout the current year. The income statement included twoextraordinary items: a $360,000 gain from condemnation of landand a $235,000 loss arising from flood damage, both afterapplicable income tax.

Determine the per share figures for common stock for (a)income before extraordinary items and (b) net income.

(Note: (b) Earnings per share on common stock,$3.00)

Explanation / Answer

A.

B.

A.

Earning per share = Income before extraordinary items /Number of outstanding common stock IBET      = $1250000 + $235000(loss from flood) - $360000 (gainfrom condemnation of land) Number of oustanding stock                   = 250000 Earning per share = $1125000 / 250000           = $4.50

B.

Earning per share = Net Income / Number of oustanding common stock $3.00            = Net Income / 250000 NetIncome          = $750,000

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