Question

At December 31, 2019, Oriole Corporation had the following stock outstanding. 10% cumulative preferred stock, $100 par, 109,261 shares $10,926,100 Common stock, $5 par, 4,099,840 shares 20,499,200 During 2020, Oriole did not issue any additional common stock. The following also occurred during 2020. Income from continuing operations before taxes $24,649,800 Discontinued operations (loss before taxes) $3,399,100 Preferred dividends declared $1,092,610 Common dividends declared $2,322,900 Effective tax rate 35 % Compute earnings per share data as it should appear in the 2020 income statement of Oriole Corporation.

Answer 1

Answer:

The company should report the 03 EPS figures on its 2020 income statement:

EPS continuing operations = $3.64

EPS discontinued operations = $(0.54)

EPS net income = EPS continuing operations + EPS discontinued operations = $3.10

Explanation:

* Calculation in EPS continuing operations:

EPS continuing operations = (Net income from continuing operation - preferred dividend)/No. of common shares outstanding

in which: Net income from continuing operation = Income from continuing operations before taxes * (1- tax rate) = 24,649,800 * (1-35%) = $16,022,370

preferred dividend = $1,092,610

No. of common shares outstanding = 4,099,840

EPS continuing operations = ($16,022,370 - $1,092,610) / 4,099,840= $3.64

* Calculation in EPS discontinued operations:

EPS discontinued operations = Net income from discontinuing operation /No. of common shares outstanding

in which: Net income from continuing operation = Income from discontinuing operations before taxes * (1- tax rate) = (3,399,100) * (1-35%) = $(2,209,415)

No. of common shares outstanding = 4,099,840

EPS discontinued operations = (2,209,415)/ 4,099,840 = $(0.54)