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Foundations Of Financial Management
Found in: Page 49
Foundations Of Financial Management

Foundations Of Financial Management

Book edition 16th
Author(s) Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Pages 768 pages
ISBN 9781259277160

Short Answer

Prepare an income statement for Franklin Kite Co. Take your calculations all the way to computing earnings per share.

Sales

$900,000

Shares outstanding

50,000

Cost of goods sold

400,000

Interest expenses

40,000

Selling and administration expenses

60,000

Depreciation expenses

20,000

Preferred stock dividend

80,000

Taxes

50,000

The earning per share is $5.

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Step by Step Solution

Earning per share

Earning per share is computed to know the company’s earnings for each share of its stock and is widely used by the users of the organization for estimating the corporate values.

Income statement for Franklin Kite Co.

Particulars

Amount ($)

Sales

900,000

Less: Cost of goods sold

400,000

Gross profit

500,000

Less: Selling and administrative expenses

60,000

Less: Depreciation expenses

20,000

Less: Interest Expenses

40,000

Operating income

380,000

Less:Taxes

50,000

Net income after tax

330,000

Less: Preferred stock dividend

80,000

Income available for shareholders

250,000

No. of shares outstanding

50,000

Earnings per Share

5

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