acct 202

acct 202 - Net income $570,000 $570,000 $270,000 Dividends...

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Problem 14-1A Name: Carol Wynn Section: Enter the appropriate amounts in the shaded cells below. A red asterisk (*) will appear to the right of an incorrect amount in the outlined cells. 1. Plan 1 Plan 2 Plan 3 Earnings before interest and income tax $2,000,000 $2,000,000 $2,000,000 Deduct interest on bonds 0 0 500,000 Income before income tax $2,000,000 $2,000,000 $1,500,000 Deduct income tax 800,000 800,000 600,000 Net income $1,200,000 $1,200,000 $900,000 Dividends on preferred stock 0 500,000 250,000 Available for dividends on common stock $1,200,000 $700,000 $650,000 Divide by shares of common stock outstanding 1,000,000 500,000 250,000 Earnings per share on common stock $1.20 $1.40 $2.60 2. Plan 1 Plan 2 Plan 3 Earnings before interest and income tax $950,000 $950,000 $950,000 Deduct interest on bonds 0 0 500,000 Income before income tax $950,000 $950,000 $450,000 Deduct income tax 380,000 380,000 180,000
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Unformatted text preview: Net income $570,000 $570,000 $270,000 Dividends on preferred stock 0 500,000 250,000 Available for dividends on common stock $570,000 $70,000 $20,000 Divide by shares of common stock outstanding 1,000,000 500,000 250,000 Earnings per share on common stock $0.57 $0.14 $0.08 3. Plan 1: Plan 2: Plan 3: Plan 3 is better for stock holders when high income is expected Plan 1 is better for stock holders if income will be low it is also better for companies if they do no have strong cash flow because dividends do not have to be paid but interest and face value at maturity must be paid or legal action could be taken. Plan 2 is better for stock holders if income will be low it is also better for companies if they do no have strong cash flow because dividends do not have to be paid but interest and face value at maturity must be paid or legal action could be taken. g g...
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acct 202 - Net income $570,000 $570,000 $270,000 Dividends...

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