For the year ended December 31, Southern Supply had net sales of $17710,000, cos
ID: 2604093 • Letter: F
Question
For the year ended December 31, Southern Supply had net sales of $17710,000, costs and other expenses (including income taxj of $6.000,000, and a gain from discontinued operations (net of income tax) of $420,000. o feandie a thohoud Inecone statement Üncluding eamings per sharej, nsuming that 910000 shares of common stock were b. Which earnings per share figure would you recommend be used to compute the price-earnings ratio for Southern Supply? Complete this question by entering your answers in the tabs below. Required A Required B Which earnings per share figure would you recommend be used to compute the price earnings ratio for southern Supply? Which earnings is used to compute the price-eamings? Required AExplanation / Answer
Answer:
A)
Income statement
Net sales
7,710,000
Less: costs and expenses(inc. tax)
6,000,000
Income before extraordinary items
1,710,000
extraordinary gain
420,000
Net income
2,130,000
Earning per share of common stock
Earning before extraordinary items
(1,710,000/910,000)
1.88
Extraordinary gain (4,20,000/910,000)
0.46
Net earnings (1.88+0.46)
2.34
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B)
One should recommend the earning per share before extraordinary item that is 1.88 in this case
Income statement
Net sales
7,710,000
Less: costs and expenses(inc. tax)
6,000,000
Income before extraordinary items
1,710,000
extraordinary gain
420,000
Net income
2,130,000
Earning per share of common stock
Earning before extraordinary items
(1,710,000/910,000)
1.88
Extraordinary gain (4,20,000/910,000)
0.46
Net earnings (1.88+0.46)
2.34