The following information is available for Blossom Corporation for the year ended December 31, 2020:
| Sales revenue | $830,000 |
| Other revenues and gains | $90,500 |
| Operating expenses | $105,000 |
| Cost of goods sold | $469,000 |
| Other expenses and losses | $30,000 |
| Preferred stock dividends | $40,175 |
The company’s tax rate was 25%, and it had 68,000 shares outstanding during the entire year.
Calculate earnings per share.
Three different plans for financing an $80,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income:
| Plan 1 | Plan 2 | Plan 3 | |
|---|---|---|---|
| 9% bonds | – | – | $40,000,000 |
| Preferred 5% stock, $25 par | – | $40,000,000 | 20,000,000 |
| Common stock, $20 par | $80,000,000 | 40,000,000 | 20,000,000 |
| Total | $80,000,000 | $80,000,000 | $80,000,000 |
Instructions:
1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $10,000,000.
2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $6,000,000.
3. Discuss the advantages and disadvantages of each plan.
For 2017 Kuhlman Corporation reported a net income of $36,000; net sales of $400,000; and an average share outstanding 16,000. There were no preferred dividends.
What were the 2017 earnings per share?
a. $2.25
b. $0.44
c. $25
d. $0.09
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