1- 2 2015, Esther Corporation reported net income of $1,000,000. It declared and

ID: 2532415 • Letter: 1

Question

1- 2

2015, Esther Corporation reported net income of $1,000,000. It declared and paid preference rdinary share dividends of $100,0o0. During 2015, Esther had a average of 250,ooo ordinary shares outstanding. Compute Esther's 2015 earnings per 1. In dividends of $250,000 and o weighted share. A. $2.60 B. $3.00 C. $4.00 D. $5.00 2. Lantos Company had a 40% tax rate. Given the following pre-tax amounts, what would be the income tax expense reported on the face of the income statement? Sales revenue Cost of goods sold Salaries and wages expense Depreciation expense Dividend revenue Utilities expense Loss from discontinued operations Interest expense $110,000 60,000 8,000 11,000 9,000 1,000 10,0oo 2,000 A. $14,80o B. $10,80o C. $11,200 D. $7,200

Explanation / Answer

Total earnings available to common shareholders = Net income – Preferred dividend

= $ 1,000,000 - $ 250,000 = $ 750,000

Earnings per share = Total earnings/No. of shares outstanding

= $ 750,000/250,000 = $ 3

Hence option “B. $3.00” is correct answer.

Sales revenue

$110,000

Less: Cost of goods sold

$60,000

Less: Salaries and wages expense

$8,000

Less: Depreciation expense

$11,000

Add: Dividend revenue

$9,000

Less: Utilities expense

$1,000

Less: Interest expense

$2,000

EBT

$37,000

Tax @ 40 %

$14,800

Hence option “A. $14,800” is correct answer.