Eastern Aviation operated both an airline and severalrestaurants located near airports. During the year just ended, allrestaurant operations were discontinued and the following operatingresults were reported.
Continuing operations(airline): Net sales $ 27,560,000 Costs and expenses 21,660,000 Otherdata: Operating income fromrestaurants (net of income tax) 432,000 Gain on sale of restaurants (netof income tax) 2,478,000 Nonrecurring loss 1,200,000
All of these amounts are before income taxes unless indicatedotherwise. The company's income tax rate is 40 percent. Thenonrecurring loss resulted from damage to a warehouse that is notrelated to the discontinued restaurant operations. Eastern Aviationhad 1,000,000 shares of capital stock outstanding throughout theyear.
Required:
a. Prepare a condensed income statement,including proper presentation of the discontinued restaurantoperations and the nonrecurring loss. Include all appropriateearnings per share figures.
b. Assume that you expect the profitability ofEastern Aviation operations to decline by 5 percent next year, andthe profitability of the restaurants to decline by 10 percent. Whatis your estimate of the companyâs net earnings per share nextyear?
Eastern Aviation operated both an airline and severalrestaurants located near airports. During the year just ended, allrestaurant operations were discontinued and the following operatingresults were reported.
| Continuing operations(airline): | |||
| Net sales | $ | 27,560,000 | |
| Costs and expenses | 21,660,000 | ||
| Otherdata: | |||
| Operating income fromrestaurants (net of income tax) | 432,000 | ||
| Gain on sale of restaurants (netof income tax) | 2,478,000 | ||
| Nonrecurring loss | 1,200,000 | ||
All of these amounts are before income taxes unless indicatedotherwise. The company's income tax rate is 40 percent. Thenonrecurring loss resulted from damage to a warehouse that is notrelated to the discontinued restaurant operations. Eastern Aviationhad 1,000,000 shares of capital stock outstanding throughout theyear.
Required:
a. Prepare a condensed income statement,including proper presentation of the discontinued restaurantoperations and the nonrecurring loss. Include all appropriateearnings per share figures.
b. Assume that you expect the profitability ofEastern Aviation operations to decline by 5 percent next year, andthe profitability of the restaurants to decline by 10 percent. Whatis your estimate of the companyâs net earnings per share nextyear?
Related questions
Atlantic Airlines operated both an airline and several motelslocated near airports. During the year just ended, all moteloperations were discontinued and the following operating resultswere reported: |
| Continuingoperations (airline): | ||||
| Net sales | $ | 57,000,000 | ||
| Costs and expenses(including income taxes on continuing operations) | 42,600,000 | |||
| Otherdata: | ||||
| Operating income frommotels (net of income tax) | 840,000 | |||
| Gain on sale of motels(net of income tax) | 4,956,000 | |||
| Extraordinary loss (netof income tax benefit) | 3,360,000 | |||
The extraordinary loss resulted from the destruction of anairliner by an earthquake. Atlantic Airlines had 1,000,000 sharesof capital stock outstanding throughout the year. |
| a. | Prepare a condensed income statement, including properpresentation of the discontinued motel operations and theextraordinary loss. Include all appropriate earnings per sharefigures.
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