**Effect of Financing on Earnings per Share**Henriksen Co., which produces and sells biking equipment, is financed as follows:- **Bonds payable, 10% (issued at face amount):** $2,400,000- **Preferred $1 stock, $10 par:** $2,400,000- **Common stock, $25 par:** $2,400,000Income tax is estimated at 40% of income.Determine the **earnings per share of common stock**, assuming that the income before bond interest and income tax is:- (a) $1,128,000- (b) $1,368,000- (c) $1,608,000**Enter answers in dollars and cents, rounding to two decimal places.**a. Earnings per share on common stock: ______b. Earnings per share on common stock: ______c. Earnings per share on common stock: ______**Instructions**- Calculate the earnings per share for each given income scenario.- Ensure accuracy by rounding to two decimal places.**Note:** To verify your calculations, use the "Check My Work" feature.

Interest on Bonds = Face value of bonds x rate of interest = $2400000 x 10% = $240,000 No. of preferred share = Total face value / Par value per share = $2400000/10 = 240000 shares No. of common share = Total face value / Par value per share = $2400000/25 = 96000 shares Particulars a. b. c. Income before bond interest and income tax $1128000 $1368000 $1608000 Less: Interset on Bonds (240000) (240000) (240000) Income Before tax $888000 $1128000 $1368000 Less: Income tax expense @40% (355200) (451200) (547200) Net Income $532800 $676800 $820800 Less: Preferred dividend (240000 shares x $1) (240000) (240000) (240000) Net income available for common stockholders $292800 $436800 $580800 Divided by: No. of common stock 96000 96000 96000 Earnings per share on common stock $3.05 $4.55 $6.05

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Henriksen Co., which produces and sells biking equipment, is financed as follows: Bonds payable, 10% (issued at face amount) $2,400,000 Preferred $1 stock, $10 par 2,400,000 Common stock, $25 par 2,400,000 Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming that the income before bond interest and income tax is (a) $1,128,000, (b) $1,368,000, and (c) $1,608,000. Enter answers in dollars and cents, rounding to two decimal places. a. Earnings per share on common stock b. Earnings per share on common stock S C. Earnings per share on common stock$

Henriksen Co., which produces and sells biking equipment, is financed as follows: Bonds payable, 10% (issued at face amount) $2,400,000 Preferred $1 stock, $10 par 2,400,000 Common stock, $25 par 2,400,000 Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming that the income before bond interest and income tax is (a) $1,128,000, (b) $1,368,000, and (c) $1,608,000. Enter answers in dollars and cents, rounding to two decimal places. a. Earnings per share on common stock b. Earnings per share on common stock S C. Earnings per share on common stock$

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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