I regular Items shown below is information relating to operations of Ayers, Inc.
ID: 2388223 • Letter: I
Question
I regular Itemsshown below is information relating to operations of Ayers, Inc. for 20 10.
Continuing Operations:
Net Sales
Costs and expenses (including income taxes)
$7,000,000
6,100,000
Current-year profit generated by segment of the business
discontinued in May (net of income taxes)
gain on disposal of discontinued segment (net of income
taxes)
extraordinary loss (net of income tax benefit)
600,000
200,000
(350,000)
Th e company had 25,000 shares of common stock outstanding for six months of the year and
1 5,000 shares of stock outstanding throughout the remainder of the year. It had no preferred
st ck.
In the space below complete the income statement for Ayers, Inc. including at least 3
different earnings per share figures - 1) earnings per share from continuing operations 2)
earnings per share before extraordinary item and 3) net earnings per share:
Ayers, Inc.
Condensed Income Statement
For the Year Ended December 31, 20 I0
Explanation / Answer
1) earnings per share from continuing operations Gain from Cntinuing Ops = 7,000,000-6,100,000 EPS = (Income from continuing ops)/Weighted average number of common shares outstanding ie EPS = (900,000-0)/(25000*(6/12) + 15000*(6/12)) = $45.00 2)earnings per share before extraordinary item EPS = (Income excluding Extraordinary iems)/Weighted average number of common shares outstanding ie EPS = (900,000+600,000+200,000-0)/(25000*(6/12) + 15000*(6/12)) = $85.00 3) net earnings per share EPS = Net Income//Weighted average number of common shares outstanding ie EPS = (900,000+600,000+200,000-350,000)/(25000*(6/12) + 15000*(6/12)) = $67.50