Starting with income from operations before income taxes, prepare a comparative
ID: 2511289 • Letter: S
Question
Starting with income from operations before income taxes, prepare a comparative income statement for the years ended May 31, 2018 and 2017. The statement wil be part of Sage Problem 16-9 Sage Corporation is preparing the comparative financial statements to be included in the annua report to stockholders. Sage employs a fiscal year ending May 31 Corporation's annual report to stockholders and should include appropriate earnings per share presentation. (Round earnings per share to 2 decimal places, e.g. $2.55.) Income from operations before income taxes for Sage was $1,445,000 and $635,000 respectively, for fiscal years ended May 31, 2018 and 2017. Sage experienced a loss from discontinued operations of $367,000 on March 3, 2018" A 40% combined income tax rate pertains to aoy.and.all of Sage Corporation's profits, gains, and losses. SAGE CORPORATION Comparative Income Statement For the Years Ended May 31, 2018 and 2017 2018 2017 Sage'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. Sage issued 37,100 shares of $100 par value, 6% cumulative preferred stock in 2014, All-of this stock is outstanding, and no preferred dividends are in arrears. There were 1,003,200 shares of $1 par common stock outstanding on June 1, 2016. On September 1, 2016, Sage sold an additional 422,400 shares of the common stock at $18 per share. Sage distributed a 20% stock dividend on the common shares outstanding on December 1, 2017. These were the only common stock transactions during the past 2 fiscal years. Determine the weighted-average number of common shares that would be used in computing earnings per share on the current comparative income statement for: Earnings per share Weighted-average number of common shares (1) The year ended May 31, 2017 (2) The year ended May 31, 2018 Click if you would like to Show Work for this question: Open Show WorkExplanation / Answer
Determination of weighted average number of common shares
Particulars
Shares
Weighted average shares
Number of Shares outstanding as on June 01, 2016
1003200
(1003200 x 12/12)
1003200
Additional shares sold on September 01, 2016
422400
(422400 x 9/12) as the shares were sold on 1 September, 2016
316800
Weighted average number of common shares as on May 31, 2017
1320000
Particulars
Shares
Weighted average shares
Number of Shares outstanding since June 01, 2016
1003200
(1003200 x 12/12)
1003200
Additional shares sold on September 01, 2016
422400
(422400 x 12/12)
422400
Weighted average number of common shares as on May 31, 2018
1425600
Sage Corporation
Comparative income statement
2018
2017
Income from operations before income taxes
1,445,000.00
635,000.00
Profit / (loss) from discontinued operations
(367,000.00)
Net income before taxes
1,078,000.00
635,000.00
Less: Taxes @40%
431,200.00
254,000.00
Net income after taxes
646,800.00
381,000.00
Less: Preferred dividend
(37100 x 100) X 6%
222,600.00
222,600.00
Income available to common shareholders
424,200.00
158,400.00
Weighted average number of shares outstanding as on relevant dates
1,425,600.00
1,320,000.00
Earnings per share
(424200 / 1425600)
0.297558923
(158400 / 1320000)
0.12
Determination of weighted average number of common shares
Particulars
Shares
Weighted average shares
Number of Shares outstanding as on June 01, 2016
1003200
(1003200 x 12/12)
1003200
Additional shares sold on September 01, 2016
422400
(422400 x 9/12) as the shares were sold on 1 September, 2016
316800
Weighted average number of common shares as on May 31, 2017
1320000
Particulars
Shares
Weighted average shares
Number of Shares outstanding since June 01, 2016
1003200
(1003200 x 12/12)
1003200
Additional shares sold on September 01, 2016
422400
(422400 x 12/12)
422400
Weighted average number of common shares as on May 31, 2018
1425600
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