34 50000000 Add back major casualty loss 18000000 Income from operations

34 50000000 add back major casualty loss 18000000

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[$33,000,000 ÷ (1 – .34)] ................................ 50,000,000 Add back major casualty loss ......................... 18,000,000 Income from operations ............................. 68,000,000 Income taxes (34% X $68,000,000) .................. 23,120,000 Income before extraordinary item ................... 44,880,000 Extraordinary item: 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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4-10 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 b $11,880,000 10,000,000 = $4.45* 10,000,000 = $1.19* *Rounded
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4-11 EXERCISE 4-16 (30–35 minutes) (a) Roland Carlson Inc. Income Statement For the Year Ended December 31, 2007 Revenues Sales ........................................................................................... $1,900,000 Rent revenue .............................................................................. 40,000 Total revenues ................................................................. 1,940,000 Expenses Cost of goods sold ......................................................... 850,000 Selling expenses ............................................................. 300,000 Administrative expenses ................................................ 240,000 Total expenses ....................................................... $1,390,000 Income from continuing operations before income tax ................................................................. 550,000 Income tax ............................................................ 187,000 Income from continuing operations ............................ 363,000 Discontinued operations Loss on discontinued operations ....................... $75,000 Less: Applicable income tax reduction ............. 25,500 49,500 Income before extraordinary items ............................. 313,500 Extraordinary items: Extraordinary gain ............................................... 95,000 Less: Applicable income tax ............................... 32,300 62,700 376,200 Extraordinary loss ............................................... 60,000 Less: Applicable income tax reduction ............. 20,400 39,600 Net income ..................................................................... $ 336,600
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4-12 EXERCISE 4-16 (Continued) Per share of common stock: Income from continuing operations ($363,000 ÷ 100,000) ....... $3.63 Loss on discontinued operations, net of tax ....................... (.49 ) Income before extraordinary items ($313,500 ÷ 100,000) ........ 3.14 Extraordinary gain, net of tax ................................................ .63 Extraordinary loss, net of tax ................................................ (.40 ) Net income ($336,600 ÷ 100,000) .......................................... $3.37 (b) Roland Carlson Inc. Retained Earnings Statement For the Year Ended December 31, 2007 Retained earnings, January 1 ......................................................... $600,000 Add: Net income .............................................................................. 336,600 $936,600 Less: Dividends declared ............................................................... 150,000 Retained earnings, December 31 ................................................... $786,600 (c) Roland Carlson Inc. Comprehensive Income Statement For the Year Ended December 31, 2007 Net income ............................................................................... $336,600 Other comprehensive income Unrealized holding gain .................................................... 15,000 Comprehensive income .......................................................... $351,600
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