Casualty loss 18000000 Less Applicable income tax reduction 6120000 11880000

Casualty loss 18000000 less applicable income tax

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            Casualty loss $18,000,000             Less: Applicable income tax reduction          6,120,000    11,880,000       Net income $33,000,000
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EXERCISE 4-9 (Continued) Net income ........................................................................................... $33,000,000       Less: Provision for preferred dividends           (8% of $4,500,000) .....................................................................             360,000       Income available to common stockholders ................................ 32,640,000       Common stock shares .................................................................. ÷ 10,000,000       Earnings per share ........................................................................ $3.26 * Income statement presentation       Per share of common stock:             Income before extraordinary item ......................................... $4.45 a             Extraordinary item, net of tax ................................................. (1.19 ) b             Net income ............................................................................... $3.26 a $44,880,000 – $360,000 = $4.45* b $11,880,000 = $1.19* 10,000,000 10,000,000 *Rounded
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EXERCISE 4-12  Net income:       Income from continuing operations            before income tax $23,650,000       Income tax (35% X $23,650,000)         8,277,500       Income from continuing operations 15,372,500       Discontinued operations             Loss before income tax $3,225,000             Less: Applicable income tax (35%)    1,128,750          2,096,250       Net income $13,276,250 Preferred dividends declared: $  1,075,000 Weighted average common shares outstanding 4,000,000 Earnings per share       Income from continuing operations $3.57*       Discontinued operations, net of tax         (.52 )**       Net income $3.05 ***    *($15,372,500 – $1,075,000)  ÷  4,000,000. (Rounded)   **$2,096,250  ÷  4,000,000. (Rounded) ***($13,276,250 – $1,075,000)  ÷  4,000,000.
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EXERCISE 4-13  (a)     2007         Income before income tax $450,000 Income tax (35%)   157,500 Net Income $292,500 (b) Cumulative effect for years prior to 2007. Year Weighted Average     FIFO          Difference Tax Rate    (35%)        Net Effect 2005 $370,000 $395,000 $25,000 2006 390,000 430,000    40,000 Total $65,000 $22,750 $42,250 (c) 2007 2006 2005 Income before income tax $450,000 $430,000 $395,000 Income tax (35%)    157,500    150,500    138,250 Net income $292,500 $279,500 $256,750
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