1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Ronch [10]
4 years ago
15

Assume that the following data relative to Kane Company for 2018 is available: Net Income $2,830,000 Transactions in Common Shar

es Change Cumulative Jan. 1, 2018, Beginning number 690,000 Mar. 1, 2018, Purchase of treasury shares (50,400) 639,600 June 1, 2018, Stock split 2-1 639,600 1,279,200 Nov. 1, 2018, Issuance of shares 246,000 1,525,200 6% Cumulative Convertible Preferred Stock Sold at par, convertible into 210,000 shares of common (adjusted for split): $1,050,000 Stock OptionsExercisable at the option price of $25 per share. Average market price in 2018, $30 (market price and option price adjusted for split): 96,000 sharesa. Compute weighted average shares outstanding for 2018b. Compute the basic earnings per share for 2018.c. Compute the diluted earnings per share for 2018.
Business
1 answer:
Vadim26 [7]4 years ago
7 0

Answer:

Weighted average shares outstanding = 1,337,000

Basic EPS = $2.07

Diluted EPS = $1.78

Explanation:

Computation of Weighted Average Shares outstanding for 2018

Date Particulars Shares

1-Jan Outstanding 690,000

1-Mar Repurchase (25/30 x 50,400) -42,000  = 648,000

1-Jun Stock split 2-1 (648,000 x 2) = 1,296,000

1-Nov Issued (1/6 x 246,000) = 41,000

Weighted Average Shares outstanding = 1,337,000

Computation of Basic Earnings per share for the year 2018

Basic Earnings per Share (Total Income - Preferred Dividend) / Outstanding Shares

($2,830,000 - $63,000) / 1,337,000 shares

2,767,000/1,337,000 shares

$2.07

Hence EPS basic = $2.07

Note: Preferred Dividend = 6% x $1,050,000 = $63,000

Additional shares for purposes of diluted earnings per share

Particulars                                                           Shares

Potentially Dilutive Securities  

6% Cumulative Convertible Preferred Stock  210,000

Stock Options  

Proceeds from exercise of 96,000 options (96,000 x $25)

= $2,400,000  

Shares issued upon exercise of options = 96,000  

Less: Treasury stock purchasable with proceeds

    ($2,400,000 / $30) = 80,000

hence, (96,000 - 80,000) =                                           16,000

Dilutive Securities (Additional Shares)  =              216,000

Computation of Diluted Earnings per share for the year 2018

Diluted Earnings per Share (Total Income - Preferred Dividend) / (Outstanding Shares + Diluted Shares)

(2,830,000 - $63,000) / (1,337,000 + 216,000) shares

$2,767,000 / 1,553,000 shares

$1.78

Hence EPS dilute = $1.78

You might be interested in
In the chapter, we used Rosengarten Corporation to demonstrate how to calculate EFN. The ROE for Rosengarten is about 7.3 percen
satela [25.4K]

Answer:

Explanation:

Sustainable Growth:

The maximum growth rate a firm can achieve with no external equity financing while maintaining  a constant debt-equity ratio is known as Sustainable Growth Rate. It is the maximum rate of  growth a firm can maintain without increasing its financial leverage.

The formula for finding out the sustainable growth rate is:

sustainable\, grwth\, rate=\frac{ROE \times b}{1-ROE \times b}

Where

ROE — Retum On Equity

b — plowback or retention ratio

ROE is the product of profit margin, total asset turnover and equity multiptier.

External Financing Needed (EFN) is the increase in assets minus the addition to retained

earnings.

EFN = Increase in assets - Addition to retained earnings

The increase in assets is the product of the beginning assets and the growth rate.

Increase in assets = Beginning assets x growth rate

The addition to the retained earnings next year is the product of current net income and the

retention ratio and one plus growth rate.

Addition to retained earnings = Current net income x retention ratio x(1+ growth rate)

The ROE of Rosengarten Corporation is 7.3%, plowback ratio is 67%. Then, the sustainable  growth rate is 5.14% only. The question is whether a growth rate of 25% can be used to calculate  the EFN (External Funds Needed).

The growth rate of 25% can be used to calculate the EFN. The sustainable growth rate formula is

based on two assumptions that the company does not want to sell new equity, and that the  financial policy is fixed. If the company rises outside equity, or increases its debt-equity ratio. it  can grow at a higher rate than the sustainable growth rate.

A firm's ability to sustain growth depends on the following four factors:

1. Profit Margin: An increase in profit margin will increase the firm's ability to generate funds

internally and thereby increase its sustainable growth.

2. Dividend policy: A decrease in the percentage of net income paid out as dividends will

increase the retention ratio. This increase internally generated equity and thus increases

sustainable growth.

3. Financial policy: An increase in the debt-equity ratio increases the firm’s financial leverage.

Since this makes additional debt financing available, it increases the sustainable growth rate.

4. Total asset turnover: An increase in the firm's total asset turnover increases the sales  generated for each dollar in assets. This decreases the firm’s need for new assets as sales grow  and thereby increases the sustainable growth rate. The increasing total asset turnover is the

same as decreasing capital intensity.

The sustainable growth rate illustrates the explicit relationship between the firm's four major  areas; its operating efficiency as measured by profit margin, its asset use efficiency as measured  by total asset turnover, its dividend policy as measured by the retention ratio, and its financial  policy as measured by the debt-equity ratio.

Thus, the company could also grow faster when its profit margin increases, it it changes its dividend policy, by increasing the retention ratio or by increasing its total asset turnover.

7 0
3 years ago
1.What similarities do you see in current-day medicine and medicine in ancient 2.times? What differences do you see in current-d
tatyana61 [14]
There aren't very many similarities in modern and ancient medicine, however one othe similarities would be acupuncture. We still use acupunture today" as the ancient Chinese did thousands of years ago.
8 0
4 years ago
Assume that you are a loan officer of a bank. A local church is seeking a $4 million, 20-year loan to construct a new classroom b
n200080 [17]

Answer:

Explanation:

a.

There is little information on how funds are used or how much money is spent to manage the church. The financial statements have been prepared incorrectly.

Interpretation:

While drafting the financial accounts, the church committed many errors. The church's revenue is equivalent to its daily operations operating expenditures. They have approximately $3 million in funding assets that they do not owe any money on.  

It may be deduced that the church is attempting to preserve asymmetric information, and therefore it will be better to justify its sources of income and use of money in order to determine whether they can or they cannot pay the debt.

b.

The revenue from various channels must be detailed in the yearly report so that the loan officer may make an informed judgment.

Interpretation:

Since payments and contributions account for 90% of revenue and revenue from other sources accounts for 10%, it's surprising how the church earns money in other ways as stated on the income statement. As a result, it's important to understand what other potential revenue streams the church has before approving the loan.

c.

The officer in charge of the loan should check the church's book records to make sure and guarantee that there are no outstanding loans. This situation necessitates a thorough examination and assessment.

Interpretation:

The church has $3 million worth of equipment. The church's expenses, on the other hand, are equivalent to the church's income. As a result, it's unclear how the church acquired the equipment without taking out a loan. As a result, the church must be urged to produce a full breakdown of its expenses, which may be thoroughly and fully studied to see whether there are any financing charges that the church is attempting to hide in its yearly reports.

d.

There is no direct or primary source of income for the church. It solely makes money from charity donations.

Interpretation:

The church's only sources of income are fundraisers and charitable donations. It also doesn't possess any significant revenue streams. Because the church is attempting to conceal numerous possible pieces of information, this may be a case of micro-management by the proprietors, and so these issues should be considered by the officer in charge of the loan before accepting the loan.

8 0
3 years ago
North Company has completed all of its operating budgets. The sales budget for the year shows 50,220 units and total sales of $2
Oduvanchick [21]

Answer:

A budgered income statement was prepared for North company for the year ending December 31st 2020.

Explanation:

Solution

                              The NORTH COMPANY

                              Budgeted Income Statement

                           For the year December 31st, 2020 Ended

Particulars                                                          Amount

Sales                                                                 $2,414,100

Less: Cost of goods sold

[50,220 Units x $23.00 per unit]                    -11,55,060

The Gross Profit                                                 12,59,040

Less: Selling and administrative expenses     -3,09,700

Earnings before interest and taxes                  9,49,340

Less: Interest Expenses                                   -10,260

The earnings before taxes                                 9,39,080

Less: Income Taxes                                           -2,26,200

The Net Income                                                  7,12,880

The net income for the NORTH COMPANY for the year ended December 31st 2020 is $7,12,880

6 0
3 years ago
Obama Company sells its product for $25 per unit. During 2012, it produced 20,000 units and sold 15,000 units (there was no begi
horrorfan [7]

Answer:

Unitary cost= $12

Explanation:

Giving the following information:

direct materials $5

direct labor $4

variable overhead $3

The variable costing method incorporates all variable production costs (direct material, direct labor, and variable overhead) to calculate the product unitary cost.

Unitary cost= 5 + 4 + 3= $12

3 0
3 years ago
Other questions:
  • Brad operates a storage business on the accrual method. On July 1 Brad paid $48,000 for rent on his storage warehouse and $18,00
    10·1 answer
  • When you code a union that combines two result sets, each result set must have the same number of columns?
    14·1 answer
  • What is rent in personal finance ?
    10·1 answer
  • Mary is purchasing a home for 145000 she is in the process of selling her present home for 85000 what will her down payment equa
    15·1 answer
  • A shelf in the Metro Department Store contains 95 colored ink cartridges for a popular ink-jet printer. Five of the cartridges a
    5·1 answer
  • Imagine that an economic recession erodes consumer confidence. As a result, the marginal propensity to consume drops from .8 to
    11·1 answer
  • A more efficient means of processing algae to produce an anticancer drug is discovered. as a result, the supply curve for the dr
    9·1 answer
  • Juan is temporarily between jobs while searching for a new one. This type of short-term unemployment is called __________ unempl
    7·1 answer
  • Trent Inc. needs an additional worker on a multiyear project. It could hire an employee for a $88,000 annual salary. Alternative
    15·1 answer
  • After its success in Japan, Starbucks worked with local operators, collecting initial fees and then royalties on store revenues
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!