How do I find the earnings per share answers at the bottom, I am stuck on that.

Question

How do I find the earnings per share answers at the bottom, I am stuck on that. Howard Brown IS Corporate Income Statement Magnus Incorporated Income Statement For Month Ended February 28 Sales $452,500 Cost of merchandise sold Merchandise inventory, beginning 75,000 Purchases 300,000 Merchandise available for sale 375,000 Less merchandise inventory, ending 68,000 Cost of merchandise sold 307,000 307,000 Gross profit $145,500 Operating expenses Selling expenses Depreciation expense- store equipment $2,500 Advertising expense 10,100 Salaries expense 15,000 Store supplies expense 2,525 Total selling expenses $30,125 <<<<<<<<<< hint: $30,125 General expenses Depreciation expense-office equipment $500 Insurance expense 500 Salaries expense 17,000 Office supplies expense 1,025 Rent expense 500 Total general expenses $19,525 <<<<<<<<<< hint: $19,525 Total operating expenses 49,650 Income from operations $95,850 Other expenses Interest expense 2,500 Income from continuing operations before taxes $93,350 Income tax 15,000 Income from continuing operations $78,350 Loss from disposal of a segment of business $23,000 Less: reduction in applicable income tax 4,500 18,500 Income before extraordinary item $59,850 Extraordinary loss $10,000 Less: reduction in applicable income tax 1,100 8,900 Net income $50,950 Earnings per share Income from continuing operations $0.00 Loss on discontinued operations 0.00 Income before extraordinary item 0.00 Extraordinary item 0.00 Net income $0.00 hint: Net Income is $2.54

Explanation / Answer

The net income for calculation of earnings per share is taken is the net income from continuing operations after tax and preference dividend. Therefore net income includes income/loss from extraordinary items also. The net income for calculation of earnings per share should be taken as $50,950.

But the earnings per share should be calculated for continuing operations which excludes income/loss from discontinued operations, extraordinary items, preference dividend etc. In that case of calculation of earnings per share for continuing operations the net income should to be taken would be $78,350.

I have not been given with number of weighted average common shares therefore here I wont be able to calculate earning per share.

If the earning per share of $2.54 is calculated by dividing net income of $50,950/ weighted average outstanding common shares then it is correct.

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