Question

111LL LLP 12-5. The following data relate to the operations of Slick Software, Inc., during 2015. $19,850,000 16,900,000 ........ ment 140,000 Continuing operations: Net sales ............ Costs and expenses (including applicable income tax) ....... Other data: Operating income during 2015 on segment of the business discontinued near year-end (net of income tax) ....... Loss on disposal of discontinued segment (net of income tax benefit) ......................... Extraordinary loss (net of income tax benefit) Prior period adjustment (increase in 2014 depreciation expense, net of income tax benefit) ........ Cash dividends declared ........ 550.000 900,000 350,000 950,000

Answer 1

Consolidated income statement Amount Particulars Amount Net sales Cost and expenses Income from continuing operations Discontinued operations Operating income (net of income tax) Loss on disposal (net of income tax) Net income $1,98,50,000.00 $1,69,00,000.00 29,50,000.00 1,40,000.00 5,50,000.00 $ -4,10,000.00 25,40,000.00 Earnings per share of common stock Particulars Amount Total outstanding stocks Preference share dividend Earnings from continuing operations Profit from discontinued operations Earnings before extraordinary items 200000 500000 =8000*6.25 12.25 =(2950000-500000)/200000 -2.05 -410000/200000 10.2 Statement of retained earnings Amount Particulars Profit for the current year Prior period adjustment Extra ordinary gain 2540000 60000 36000 Total retained earnings as on december 2636000 Particulars Amount Total cash dividend declared Preference share dividend Cash dividend to equity shareholder Outstanding shares Cash dividend per share 950000 500000=80000*6.25 450000 200000 2.25 =450000/200000 Eastimated earnings of 8 per share for 2016 is less than current year earnings of 12.25 per share and hence it is unfavourable as compared to 2015 EPS as it signifies decrease in net profit either due to decrease in revenue or increase in expenses resulting in decrease in EPS as compared to current year.