# Compute Earnings Per Share | Accounting homework help

Domanico Co., which produces and sells biking equipment, is financed as follows:

 Bonds payable, 6% (issued at face amount) \$5,000,000 Preferred \$2 stock, \$100 par 5,000,000 Common stock, \$25 par 5,000,000

Income tax is estimated at 40% of income.

Determine the earnings per share of common stock, assuming that the income before bond interest and income tax is (a) \$600,000, (b) \$800,000, and (c) \$1,200,000.

Frey Co. is considering the following alternative financing plans:

Plan 1 Plan 2
Issue 5% bonds (at face value) \$6,000,000 \$2,000,000
Issue preferred \$1 stock, \$20 par 6,000,000
Issue common stock, \$25 par 6,000,000 4,000,000

Income tax is estimated at 40% of income.

Determine the earnings per share of common stock, assuming that income before bond interest and income tax is \$800,000.

Whispering Corporation earned \$422,000 during a period when it had an average of 100,000 shares of common stock outstanding. The common stock sold at an average market price of \$15 per share during the period. Also outstanding were 14,700 warrants that could be exercised to purchase one share of common stock for \$10 for each warrant exercised.

(a) Are the warrants dilutive?

(b) Compute basic earnings per share.

(c) Compute diluted earnings per share.

A firm had the following accounts and financial data for 2005: Sales revenue \$3,060 Accounts receivable \$500 Interest expense \$126 Total operating expenses \$600 Accounts payable \$240 Cost of goods sold \$1,800 Preferred stock dividends \$18 Tax rate 40% Number of common shares outstanding 1,000 The firm’s earnings per share, rounded to the nearest cent, for 2005 was _____.

a. \$0.5335

b. \$0.5125

c. \$0.3204

d. \$0.3024

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