Effect of Financing on Earnings Per ShareThree different plans for financing an $18,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income taxrate is estimated at 40% of income:8% BondsPreferred 4% stock, $20 parCommon stock, $10 parTotalPlan 1Plan 2Plan 3$9,000,000$18,000,000$9,000,0009,000,0004,500,0004,500,000$ 18,000,000$ 18,000,000$ 18,000,000Required:1. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $2,100,000. Enter answers in dollars and cents, rounding to the nearestwhole cent.Plan 1Plan 2Plan 3Earnings PerShare onCommon Stock2. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $1,050,000. Enter answers in dollars and cents, rounding to the nearestwhole cent.Plan 1Plan 2Plan 3Earnings PerShare onCommon StockPreviousNext >

The illustration shows a financing case study, and your task is to figure out how various financing…

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Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter8: Liabilities And Stockholders' Equity

Section: Chapter Questions

Problem 8.1.3P

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Brower Co. is considering the following alternative financing plans: Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming that income before bond interest and income tax is 2,000,000.
2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $650,000. Earnings per share of common stock per share per share per share Plan 1 Plan 2 Plan 3 +A +A +A
Only need help where the red Ex's are at for question 1/ plan 3 and for question 2/ plan 3
Subject :- Accounting Three plans for financing a $28,500,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount and the income tax rate is estimated at 30%. 9% Bonds 6% Preferred Stock, $100 par Common Stock, $10 par Total Plan 1 Net income $28,500,000 $28,500,000 Earnings per share on common stock Plan 2 $ $14,250,000 $ 14,250,000 It is estimated that income before interest and taxes will be $7,125,000. $28,500,000 $14,250,000 Determine for each plan, the expected net income and the earnings per share on common stock. (Round earnings per share to 2 decimal places, e.g. 2.25.) Plan 1 Plan 3 7,125,000 $28,500,000 $ 7,125,000 Plan 2 $ $ Plan 3
Three different plans for financing a $7,400,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income. Plan 1 Plan 2 Plan 3 10% bonds $3,700,000 Preferred 10% stock, $100 par $3,700,000 1,850,000 Common stock, $7.4 par $7,400,000 3,700,000 1,850,000 Total $7,400,000 $7,400,000 $7,400,000 Round the answers to nearest cent. Instructions: 1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $14,800,000. Earnings per share of common stock Plan 1 $ per share Plan 2 $1 per share Plan 3 $4 per share 2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $7,030,000. Earnings per share of common stock Plan 1 24 per share Plan 2 $4 per share Plan 3 $ per share
Three different plans for financing a $2,200,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income. Plan 1 Plan 2 Plan 3 10% bonds $1,100,000 Preferred 10% stock, $100 par $1,100,000 550,000 Common stock, $2.2 par $2,200,000 1,100,000 550,000 Total $2,200,000 $2,200,000 $2,200,000 Round the answers to nearest cent.
Three different plans for financing an $2,100,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income: Plan 1 Plan 2 Plan 3 10% Bonds _ _ $1,050,000 Preferred 5% stock, $80 par _ $1,050,000 525,000 Common stock, $2.1 par $2,100,000 1,050,000 525,000 Total $ 2,100,000 $ 2,100,000 $ 2,100,000 Required: 1. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $4,200,000. Enter answers in dollars and cents, rounding to two decimal places. Earnings Per Share on Common Stock Plan 1 $fill in the blank 1 Plan 2 fill in the blank 2 Plan 3 fill in the blank 3 2. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $1,995,000. Enter answers in…
Three different plans for financing an $18,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income: Please see the attachment for details: Instructions1. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $2,100,000.2. Determine the earnings per share of common stock for each plan, assuming that the income before bond interest and income tax is $1,050,000.3. Discuss the advantages and disadvantages of each plan.
Three different plans for financing an $80,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income: Please see the attachment for details: Instructions1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $10,000,000.2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $6,000,000.3. Discuss the advantages and disadvantages of each plan.
Sorenson Co. is considering the following alternative plans for financing the company: Plan 1 Plan 2 Issue 10% bonds (at face) $3,000,000 Issue $10 par common stock $4,000,000 1,000,000 Income tax is estimated at 40% of income. Determine the earnings per share of common stock under the two alternative financing plans, assuming income before bond interest and income tax is $1,000,000. Round your answers to two decimal places. Earnings Per Common Share Plan 1 Plan 2
Frey Co. is considering the following alternative financing plans: Plan 1 Plan 2 Issue 10% bonds (at face value) $1,600,000 $800,000 Issue preferred $1 stock, $10 par — 1,330,000 Issue common stock, $5 par 1,600,000 1,070,000 Income tax is estimated at 40% of income. Determine the earnings per share on common stock, assuming that income before bond interest and income tax is $480,000. Enter answers in dollars and cents, rounding to two decimal places. Plan 1 $ Earnings per share on common stock Plan 2 $ Earnings per share on common stock
Brower Co. is considering the following alternative financing plans: Plan 1 Plan 2 Issue 10% bonds (at face value) $4,000,000 $2,500,000 Issue preferred $2.50 stock, $25 par Issue common stock, $10 par 3,000,000 4,000,000 2,500,000 Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming that income before bond interest and income tax is $2,000,000.

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