Homework Help is Here – Start Your Trial Now!
Business
Accounting
P16-5. Please show all your workings clearly.

P16-5. Please show all your workings clearly.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

P16-5. Please show all your workings clearly. 

P16.5 (LO 4) (Basic EPS: Two-Year Presentation) Meng Group is preparing the comparative financial statements for the annual report to its shareholders for fiscal years ended May 31, 2022, and May 31, 2023 (yen in thousands). The income from continuing operations for each year was ¥1,800,000 and ¥2,500,000, respectively. In both years, the company incurred a 10% interest expense on ¥2,400,000 of debt, an obligation that requires interest-only payments for 5 years. In 2023, the company experienced a loss from discontinued operations, net of tax, of ¥360,000. The company uses a 40% effective tax rate for income taxes. The capital structure of Meng Group on June 1, 2021, consisted of 1 million ordinary shares outstanding and 20,000 shares of Y50 par value, 6%, cumulative preference shares. There were no preference dividends in arrears, and the company had not issued any convertible securities, options, or warrants. On October 1, 2021, Meng sold an additional 500,000 ordinary shares at ¥20 per share. Meng distributed a 20% share dividend on the ordinary shares outstanding on January 1, 2022. On December 1, 2022, Meng was able to sell an additional 800,000 ordinary shares at ¥22 per share. These were the only ordinary share transactions that occurred during the 2 fiscal years. Instructions a. Identify whether the capital structure at Meng Group is a simple or complex capital structure, and explain why. b. Determine the weighted-average ordinary shares that Meng Group would use in calculating earnings per share for the fiscal year ended: 1. May 31, 2022. 2. May 31, 2023. c. Prepare, in good form, a comparative income statement, beginning with income from operations, for Meng Group for the fiscal years ended May 31, 2022, and May 31, 2023.
Transcribed Image Text:P16.5 (LO 4) (Basic EPS: Two-Year Presentation) Meng Group is preparing the comparative financial statements for the annual report to its shareholders for fiscal years ended May 31, 2022, and May 31, 2023 (yen in thousands). The income from continuing operations for each year was ¥1,800,000 and ¥2,500,000, respectively. In both years, the company incurred a 10% interest expense on ¥2,400,000 of debt, an obligation that requires interest-only payments for 5 years. In 2023, the company experienced a loss from discontinued operations, net of tax, of ¥360,000. The company uses a 40% effective tax rate for income taxes. The capital structure of Meng Group on June 1, 2021, consisted of 1 million ordinary shares outstanding and 20,000 shares of Y50 par value, 6%, cumulative preference shares. There were no preference dividends in arrears, and the company had not issued any convertible securities, options, or warrants. On October 1, 2021, Meng sold an additional 500,000 ordinary shares at ¥20 per share. Meng distributed a 20% share dividend on the ordinary shares outstanding on January 1, 2022. On December 1, 2022, Meng was able to sell an additional 800,000 ordinary shares at ¥22 per share. These were the only ordinary share transactions that occurred during the 2 fiscal years. Instructions a. Identify whether the capital structure at Meng Group is a simple or complex capital structure, and explain why. b. Determine the weighted-average ordinary shares that Meng Group would use in calculating earnings per share for the fiscal year ended: 1. May 31, 2022. 2. May 31, 2023. c. Prepare, in good form, a comparative income statement, beginning with income from operations, for Meng Group for the fiscal years ended May 31, 2022, and May 31, 2023.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Market Efficiency
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS