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The shareholders’ equity section of Bridgeport Corporation as at December 31, 2017, follows: 6% cumulative preferred...

The shareholders’ equity section of Bridgeport Corporation as at December 31, 2017, follows:

6% cumulative preferred shares, 100,000 shares authorized, 85,000 shares outstanding $4,540,000
Common shares, 18 million shares authorized and issued 18,000,000
Contributed surplus 10,000,000
32,540,000
Retained earnings 173,000,000
$205,540,000


Net income of $26 million for 2017 reflects a total effective tax rate of 20%. Included in the net income figure is a loss of $16 million (before tax) relating to the operations of a business segment that is to be discontinued.

Calculate earnings per share information as it should appear in the financial statements of Bridgeport Corporation for the year ended December 31, 2017.

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Answer #1

Earning Per Share:

Net Income (loss) EPS

= (Net Income - Preferred Dividends) / Weighted Average Common Shares Outstanding

= ($26,000,000 - $272,400) / 18,000,000

= $25,727,600 / 18,000,000

= $1.42

Continuing Operation EPS

= Income from continuing operations / Weighted Average Common Shares Outstanding

= ($26,000,000 + $12,800,000 - $272,400) / 18,000,000

= $38,527,600 / 18,000,000

= $2.14

Discontinuing Operation EPS

= $12,800,000 / 18,000,000

= $0.71

Working note:

Net Income = $26,000,000

Preferred Dividends (6% of $4,540,000) = $272,400

Weighted average common shares outstanding = 18,000,000

Discontinued operations:

Loss before tax $16,000,000

Less: Applicable Income Tax (20%) ($3,200,000)

$12,800,000

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