Answer:
A. $5.70
B. $7,625,000
C. $2.25
D. UNFAVORABLE amount of $4.25
Explanation:
a.Preparation of a condensed income statement for 2018,
SLICK SOFTWARE, INC.Condensed Income StatementFor the Year Ended December 31, 2018
Net sales $19,850,000
Costs and expenses $16,900,000
Income from continuing operations$2,950,000
Discontinued operations:
Operating income $140,000
Loss on disposal (net of income tax benefit)(550,000)
Income before extraordinary item $2,540,000 Extraordinary loss (net of income tax benefit)(900,000)
(550,000+350,000)
Net income$1,640,000
($2,540,000-900,000)
Earnings per share:
Earnings from continuing operations$12.25
[($2,950,000 - $500,000) ÷200,000]
Loss from discontinued operations (2.05)
($410,000 ÷ 200,000 shares)
Earnings before extraordinary items $10.20
[($2,540,000 - $500,000 preferred dividends) ÷ 200,000]
Extraordinary loss (4.50)
($900,000 ÷200,000 shares)
Net earnings $5.70
[($1,640,000 - $500,000 preferred dividends)÷200,000 shares]
Calculation for Preferred dividends:
Preferred dividends: 80,000 shares x $6.25 =$500,000
b.Preparation of a statement of retained earnings for the year ended December 31, 2018
SLICK SOFTWARE, INC.Statement of Retained Earnings For the Year Ended December 31, 2018
Retained earnings, December 31 2017 $7,285,000
Less: prior period adjustment350,000
Restated$6,935,000
Net income1,640,000
Subtotal$8,575,000
($6,935,000+1,640,000)
Cash dividends(950,000)
Retained earnings, December 31, 2017 $7,625,000
($8,575,000-$7,625,000)
c.Computation for the amount of cash dividend per share of common stock
Total cash dividends declared during 2018 $950,000
Less: Preferred stock dividend 500,000
(80,000 shares x $6.25 per share)
Cash dividends to common stockholders $450,000
Number of common shares outstanding 200,000
Cash dividend per common share $2.25
($450,000 ÷ 200,000 shares)
D. The amount of $8.00 earnings per share figure in 2019 will have unfavorable figure when compared with the year 2018 reason been that
the year 2019 has one Earnings Per Share amount which is why we should compared it to the earnings per share from continuing operations in year 2018, which gave us the amount of $12.25 per share[($2,950,000 - $500,000) ÷200,000] which inturn makes Slick Software, Inc.’s earnings per share from continuing operations to reduce to the amount of $4.25 per share ($12.25-$8.00) from the year 2018 to 2019
