Atlantic Airlines operated both an airline and several motels located near airports. During theyear just ended, all motel operations were discontinued and the following operating results werereported:Continuing operations (airline):Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $55,120,000Costs and expenses (including income taxes on continuing operations) . . . . 43,320,000Other data:Operating income from motels (net of income tax) . . . . . . . . . . . . . . . . . . . . . 864,000Gain on sale of motels (net of income tax) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,956,000Extraordinary loss (net of income tax benefit) . . . . . . . . . . . . . . . . . . . . . . . . . 3,360,000 The extraordinary loss resulted from the destruction of an airliner by an earthquake. Atlantic Air-lines had 1,000,000 shares of capital stock outstanding throughout the year. Instructionsa. Prepare a condensed income statement, including proper presentation of the discontinuedmotel operations and the extraordinary loss. Include all appropriate earnings per share figures.b. Assume that you expect the profitability of Atlantic Airlines operations to decline by 5 percentnext year, and the profitability of the motels to decline by 10 percent. What is your estimate ofthe company’s net earnings per share next year?
Atlantic Airlines operated both an airline and several motels located near airports. During the
year just ended, all motel operations were discontinued and the following operating results were
reported:
Continuing operations (airline):
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $55,120,000
Costs and expenses (including income taxes on continuing operations) . . . . 43,320,000
Other data:
Operating income from motels (net of income tax) . . . . . . . . . . . . . . . . . . . . . 864,000
Gain on sale of motels (net of income tax) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,956,000
Extraordinary loss (net of income tax benefit) . . . . . . . . . . . . . . . . . . . . . . . . . 3,360,000
The extraordinary loss resulted from the destruction of an airliner by an earthquake. Atlantic Air-
lines had 1,000,000 shares of capital stock outstanding throughout the year.
Instructions
a. Prepare a condensed income statement, including proper presentation of the discontinued
motel operations and the extraordinary loss. Include all appropriate earnings per share figures.
b. Assume that you expect the profitability of Atlantic Airlines operations to decline by 5 percent
next year, and the profitability of the motels to decline by 10 percent. What is your estimate of
the company’s net earnings per share next year?
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