Chapter+17+Part+2+9th+Ed.+Solutions

# Chapter+17+Part+2+9th+Ed.+Solutions - PROBLEM 17-2(a Melton...

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PROBLEM 17-2 (a) Melton Corporation has a simple capital structure since it does not have any potentially dilutive securities. (b) The weighted average number of shares that Melton Corporation would use in calculating earnings per share for the fiscal years ended May 31, 2011, and May 31, 2012, is 1,600,000 and 2,200,000 respectively, calculated as follows: 2011: Event Dates Outstanding Shares Outstanding Restate- ment Fraction of Year Weighted Shares Beginning bal. New issue June 1–Oct. 1 Oct. 1–May 31 1,000,000 1,500,000 1.20 1.20 4/12 8/12 400,000 1,200,000 1,600,000 2012: Event Dates Outstanding Shares Outstanding Fraction of Year Weighted Shares Beginning bal. New issue June 1–Dec. 1 Dec. 1–May 31 1,800,000* 2,600,000 6/12 6/12 900,000 1,300,000 2,200,000 * 1,500,000 X 1.2

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PROBLEM 17-2 (Continued) (c) MELTON CORPORATION Comparative Income Statements For Fiscal Years Ended May 31, 2011 and 2012 2011 2012 Income from operations Interest expense (1) Income before taxes Income taxes Income from continuing operations Discontinued operation loss, net of income taxes of \$240,000 Net income \$1,800,000 240,000 1,560,000 624,000 936,000 \$2,500,000 240,000 2,260,000 904,000 1,356,000 360,000 \$ 936,000 \$ 996,000 Earnings per share: Income from continuing operations \$0.55 a \$0.59 a Discontinued operations loss (0.16) b Net income \$0.55 \$0.43 (1) Interest expense = \$2,400,000 X .10 =\$240,000 2011 2012 a Income from continuing operations \$936,000 \$1,356,00 0 Preferred dividend (2) (60,000 ) (60,000) \$876,000 \$1,296,00 0 Weighted average number of shares 1,600,00 0 2,200,00 0 Earnings per share – basic \$ 0.55 \$ 0.59 b Discontinued operations loss \$(360,00 0) Weighted average number of shares 2,200,00 0 Weighted average number of shares \$ (0.16)
Preferred div. = (No. of Shares X Par Value X Dividend %) = (20,000 X \$50 X .06)

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Chapter+17+Part+2+9th+Ed.+Solutions - PROBLEM 17-2(a Melton...

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