Required:

Compute basic earnings per share for the year ended December 31, 2006.

(in millions except per share amount)

Answer:

[$398.4 - (6% x $200 x 1)]/420 = $.92 EPS

Preferred dividends in arrears for 2005 were included in the 2005 EPS.

Learning Objective: 8 Level of Learning: 3

133. Kramer Inc. had 95 million shares of common stock, 1 million shares of 6%, $100 par, cumulative preferred stock, and 1 million shares of 8%, $100 par, noncumulative preferred stock outstanding at the end of 2005 and 2006. No dividends were declared or paid on common stock in either year. In 2006, a $3 million dividend was paid on the 6% preferred stock and a $4 million dividend was paid on the 8% preferred stock. Net income for 2006 was $300 million. The company's tax rate is 30%.

Required:

Compute basic earnings per share for the year ended December 31, 2003.

(in millions except per share amount)

Answer: [$300 - (6% x $100 x 1) - $4] / 95 = $3.05 EPS

Learning Objective: 5 Level of Learning: 3

134. Capital Consulting Company had 400,000 shares of common stock outstanding on December 31, 2006. On that date, there were also 5,000 shares of, $100 par, 6% noncumulative preferred stock outstanding. On March 1, 2006, the company's common stock split 3-for-1. On December 15, 2006, a preferred dividend was declared and paid in the amount of $25,000. Net income for 2006 was $3,000,000.

Required:

Compute basic earnings per share for the year ended December 31, 2006.

Answer: ($3,000,000 - $25,000) / (400,000 x 3) = $2.48 EPS

Learning Objective: 5 Level of Learning: 3

135. Parsley Corporation had 250,000 shares of common stock and 5,000 shares of 8%, $100 par, preferred stock outstanding on December 31, 2005. The preferred stock is cumulative, nonconvertible preferred stock. On June 1, 2006, Parsley sold 36,000 shares of common stock for cash. No cash dividends were declared for 2006. Parsley reported a net loss of $320,000 for the year ended December 31, 2003.

Required:

Calculate Parsley's loss per share for the year ended December 31, 2006.

Answer:

[$ -320,000 - (8% x $100 x 5,000)]/[250,000 + (36,000 x 7/12)] =

$1.33 Loss Per Share

Learning Objective: 5 Level of Learning: 3

136. On January 1, 2006, Algerian Delivery had 100,000 shares of common stock outstanding. The following transactions occurred during 2006:

March 1:	Reacquired 3,000 shares, accounted for as treasury stock.
September 30:	Sold all the treasury shares.
December 1:	Sold 12,000 new shares for cash.
December 31:	Reported a net income of $297,750.

Required:

Calculate Algerian Delivery's basic earnings per share for the year ended December 31, 2006.

Answer:

$297,750 /[(100,000 - (3,000 x 10/12) + (3,000 x 3/12) + (12,000 x 1/12)] = $3.00 EPS

Learning Objective: 7 Level of Learning: 3