Ch 12 - Retained Earnings(2)

Taxes extraordinary items during 2012 matrix

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Unformatted text preview: et of related taxes Extraordinary Items During 2012, Matrix, experienced During a Loss of $75,000 due to an earthquake in Chicago. This was considered an extraordinary item. The Co. reported Income Before Extraordinary Item of $ 1,575,000. All gains & losses are subject to a 30% Tax Rate. How would this item appear on the 2012 Income Statement? Extraordinary Items Income Statement Presentation: Earnings before extraordinary item Extraordinary Loss: Earthquake loss (net of tax benefit of $22,500) Net income $ 1,575,000 (52,500) $ 1,522,500 Company Performance Earnings Per Share (EPS) A Measure of the Company’s Profitability & Earning Power for the period Earnings Net = Per Share Income ÷ Weighted Average Number of Shares Outstanding Based on the Number Of Shares Issued & the Length of Time that number remained Unchanged. Earnings Per Share (EPS) • Matrix has Income from continuing Operations of $ 1,750,000 • The After-tax Loss from Discontinued Operations was $ 175,000 • The Extraordinary Loss was $ 52,500 • Assume that Matrix has 156,250 Weighted Average Shares Outstanding No. of Shares Months % of Yr. 151,000 3 25.0% 158,000 9 75.0% Weighted Average Shares Weighted Amt 37,750 118,500 156,250 Earnings Per Share (EPS) $1,750,000 ÷ 156,250 * Rounded. Earnings Per Share (EPS) If Preferred Stock is present, Subtract If Preferred Dividends from Net Income prior to computing EPS. EPS is Required to be reported in the Income Statement Diluted Earnings Per Share (EPS) • If Convertible Securities (Preferred Stocks, Bonds) are Present, the conversion of these Securities increases number of Common Shares Outstanding, & might Dilute (Reduce) Earnings Per Share (EPS) In This instance, 2 figures are presented on an Income Statement: Basic Earnings Per Share Diluted Earnings Per Share – This incorporates the Impact of the Conversion of the Securities on the Basic EPS. Dividends Cash Dividends Declared by Board Declared of Directors Creates Liability at Declaration Not Legally Required Requires Sufficient Retained Earnings & Cash Dividends Dividends Payment of Dividends In many states, payment of dividends f...
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This document was uploaded on 03/12/2014 for the course ACCOUNTING 101 at Fullerton College.

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