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Accounting Questions

1. Rockwell Paper Company had earnings after taxes of $580,000 in the year 2003 with 400,000 shares of stock outstanding. On January 1, 2004, the firm issued 35,000 new shares. Because of the proceeds from these new shares and other operating improvements, earnings after taxes increased by 25%
(a) Compute earning per share for 2003
(b) Compute earnings per share for 2004

2. The Reid Book Company sold 1,500 finance textbooks for $100 each to High Tuition University in 2004. These books cost Reid $74 to produce. Reid spent $,000 (selling expense) to convince the university to buy its books. In addition,Reid borrowed $50,000 on January 1, 2004, on which the company paid 10% inteest. Both interest and principal of the loan were paid on December 31, 2004. Reid's tax rate is25%. Depreciation expense for the year was $8,000.

(a) Did Reid Book Company make a profit in 2004? Please tell me how to present this income statement.

3. Johnson Alarm Company had $800,000 of retained earnings on December 31, 2004. The company paid common dividends of $60,000 in 2004 and had retained earnings of $640,000 on December 31 2003. How much did Johnson earn duriing 2004, and what would earning per share be if 50,000 sharess of common stock were outstanding. Please show me step by step please.

Your kind help would be appreciated. I did not have a sample to follow, adn I do not quite understand how to set up these statements. Thanks a lot.

Solution Preview

Please see the calculations in attached file.

1. Earnings per share are calculated by dividing the Earnings After Tax by the number of shares outstanding. In 2003, Earnings after Tax are 580,000 and shares are outstanding are 400,000. The EPS is 580,000/400,000. In 2004, the earnings ahve increased by 25%. The new earnings are 580,000 X 1.25 = 725,000 and the shares have increased by 35,000, th new shares ...

Solution Summary

The solution has 3 accounting questions relating to EPS and income statement.

$2.19