ACCT-3021EL Chapter Notes - Chapter 17: Stock Split, Income Statement, Financial Statement

66 views9 pages

plumbee368

4 Feb 2019

School

Department

Course

Professor

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

Common shareholders need to know how much of a company"s available income can be attributed to the shares that they own. This helps them assess future dividend payouts and the value of each share. Common shareholders have a residual interest in the company. Ifrs requires the following information to be reported on the face of the income statement: Earnings per share amounts must be shown for all periods that are presented. When the income statement presents discontinued operations, eps should be disclosed for income from continuing operations, discontinued operations, and net income. Per-share amounts, where applicable, should be shown for both diluted and basic eps. Discontinued operations eps may be disclosed on the face of the statement or in the notes. If there has been a stock dividend or stock split, all per-share amounts of prior period earnings should be restated using the new number of outstanding shares.

Related Questions

Problem 16-6 Skysong Corporation is preparing the comparativefinancial statements for the annual report to its shareholders forfiscal years ended May 31, 2017, and May 31, 2018. The income fromoperations for the fiscal year ended May 31, 2017, was $1,775,000and income from continuing operations for the fiscal year ended May31, 2018, was $2,566,000. In both years, the company incurred a 10%interest expense on $2,446,000 of debt, an obligation that requiresinterest-only payments for 5 years. The company experienced a lossfrom discontinued operations of $617,000 on February 2018. Thecompany uses a 40% effective tax rate for income taxes. The capitalstructure of Skysong Corporation on June 1, 2016, consisted of954,000 shares of common stock outstanding and 20,100 shares of $50par value, 5%, cumulative preferred stock. There were no preferreddividends in arrears, and the company had not issued anyconvertible securities, options, or warrants. On October 1, 2016,Skysong sold an additional 490,000 shares of the common stock at$20 per share. Skysong distributed a 20% stock dividend on thecommon shares outstanding on January 1, 2017. On December 1, 2017,Skysong was able to sell an additional 794,000 shares of the commonstock at $22 per share. These were the only common stocktransactions that occurred during the two fiscal years. Identifywhether the capital structure at Skysong Corporation is a simple orcomplex capital structure. Determine the weighted-average number ofshares that Skysong Corporation would use in calculating earningsper share for the fiscal year ended: Weighted-average number ofshares (1) May 31, 2017 (2) May 31, 2018 Prepare, in good form, acomparative income statement, beginning with income fromoperations, for Skysong Corporation for the fiscal years ended May31, 2017, and May 31, 2018. This statement will be included inSkysongâs annual report and should display the appropriate earningsper share presentations. (Round earnings per share to 2 decimalplaces, e.g. $1.55.) SKYSONG CORPORATION Comparative IncomeStatement For Fiscal Years Ended May 31, 2017 and 2018 2017 2018 $$ $ $ Earnings per share: $ $ $ $ Question Attempts: 0 of 5 usedSave for later Submit Answer

blushimpala894

6. Hasbrooke Corporation has 50,000 shares of $1 par value commonstock and 20,000 shares of cumulative 8%, $100 par preferred stockoutstanding. Hasbrooke has not paid a dividend for the prior year.If Hasbrooke declares a $1.50 per share dividend this year, whatwill be the total amount they must pay their shareholders?

A) $30,000

B) $320,000

C) $395,000

D) $75,000

7. Retained earnings represents:

A) Cash available for dividends.

B) The amount initially invested in the business bystockholders.

C) Cash available for expansion and growth.

D) Income that has been reinvested in the business rather thandistributed as dividends to stockholders.

8. On January 1,2006, Lane Corporation had 50,000 shares of $5 par value commonstock outstanding. On March 31, 2006, Lane issued an additional8,000 shares in exchange for a building. What number of shares willbe used in the computation of basic EPS for the year 2006?

A) 50,000.

B) 58,000.

C) 56,000.

D) 52,000.

9. Mirage Corporation's financial statements for the current yearinclude the following:

Income from continuingoperations...............................................................	$620,000
Prior period adjustment (increase in prior year net income, net oftaxes)......................................................................	190,000
Cash dividends paid to preferredstockholders............................................................	202,000
Gain on sale of discontinued operations (net oftaxes)......................................................................	410,000
Operating loss on discontinued operations (net of taxes) net income, net of taxbenefit)...................................................................	320,000
Extraordinary loss (net of taxbenefit)...................................................................	95,000

On the basis of this information, net income for the current yearis:

A) $1,007,000.

B) $ 620,000.

C) $1,445,000.

D) $ 615,000.

10. During the year 2007,Moonglow Corporation suffered a $600,000 loss when its factory wasdestroyed in a flood. Assuming the corporate income tax rate is34%, what amount will Moonglow report as an extraordinary loss onits income statement for 2007? Assume floods are not common in thisarea.

A) $600,000

B) $396,000

C) $204,000.

D) Nothing, since this does not qualify as an extraordinaryitem.

11. Galaxy Corporation was organized on January 1 and issued 500,000shares of common stock on that date. On July 1, an additional200,000 shares were issued for cash. Net income for the year was$2,160,000. Net earnings per share amounted to:

A) $4.32.

B) $3.75.

C) $3.09.

D) $3.60.

18. Kims Corporation plansto invest $100 million to earn about 20% before income taxes. Thecompany is considering whether it should raise the $100 million byissuing 10% bonds payable or capital stock. If the company issuesthe bonds, it will probably report:

A) Lower net income and lower income taxes expense than if itissues capital stock.

B) Higher net income and higher income taxes expensethan if it issues capital stock.

C) Lower net income and higher income taxes expensethan if it issues capital stock.

D) Higher net income and lower income taxes expense than if itissues capital stock.

19. The amortization of a bonddiscount:

A) Decreases the carrying value of a bond and increases interestexpense.

B) Decreases the carrying value of a bond and decreasesinterest expense.

C) Increases the carrying value of a bond and increasesinterest expense.

D) Increases the carrying value of abond and decreases interest expense.

pearmink906

Common Size Income statement
	2017		2016
	$M	Percentage	$M	Percentage
Operating revenue	2319	100%	2375	100%
Operating expenses	-1666	-71.84%	-1725	-72.63%
Earnings before interest, tax, depreciation, amortisation,changes in fair value of hedges and other signifcant items(EBITDAF)	653	28.16%	650	27.37%
Depreciation and amortisation	-264	-11.38%	-236	-9.94%
Impairment of assets	-10	-0.43%	-4	-0.17%
Loss on sale of assets	-4	-0.17%	-1	-0.04%
Net change in fair value of electricity and other hedges	-76	-3.28%	-15	-0.63%
Operating profit	299	12.89%	402	16.93%
Finance Cost	79	3.41%	80	3.37%
Interest Income	2	0.09%	2	0.08%
Net change in fair value of treasury instruments	55	2.37%	-68	-2.86%
Net profit before tax	277	11.94%	256	10.78%
Income tax expense	-80	-3.45%	-71	-2.99%
Net proft after tax attributed to the shareholders of the parentcompany	197	8.50%	185	7.79%
Earnings per share (EPS) attributed to ordinary equityholders of the parent	cents		cents
Basic and diluted earnings per share	7.7	0.33%	7.2	0.30%

COMPREHENSIVE INCOME STATEMENT

2017

2016

Percentage

Net profit after tax

197

8.50%

185

7.79%

Other comprehensive income

Intems that will not be reclassifed to profit or loss

Asset revaluation

428

18.46%

889

37.43%

Defferred tax on the above item

-120

-5.17%

-248

-10.44%

Items that may be reclassified to profit or loss

308

641

Net gain on cash flow hedges

0.09%

Exchange differences arising from translation of foreignoperation

0.04%

-23

-0.97%

Income tax on the above items

0.13%

-23

-0.97%

Other comprehensive income for the year, net of tax

311

13.41%

618

26.02%

Total comprehensice income for the year, net of tax attributedto shareholders of parent company

508

21.91%

803

33.81%

BALANCE SHEET

	2017		2016
	$M	Percentage	$M	Percentage
Current Assets
Cash and cash equivalents	80	0.92%	118	1.38%
Trade receivables	260	3.00%	194	2.27%
Financial Instruments	59	0.68%	71	0.83%
Other assets	32	0.37%	23	0.27%
Total Current Assets	432	5.00%	406	5.00%
Non-current assets
Property, plant and equipment	7961	91.88%	7771	91.02%
Intangible assets	58	0.67%	47	0.55%
Deferred tax	43	0.50%	40	0.47%
Financial Instruments	172	1.98%	274	3.21%
Total non-current assets	8234	95.00%	8132	95.00%
Total assets	8665	100.00%	8538	100.00%
Current Liabilities
Payables and accuals	296	3.42%	205	2.40%
Employee entitlements	15	0.17%	15	0.18%
Current portion of termborrowings	170	1.96%	214	2.51%
Finance lease payable	1	0.01%	1	0.01%
Financial Instruments	67	0.77%	48	0.56%
Current tax payable	30	0.35%	30	0.35%
Total current Liabilities	579	6.68%	513	6.01%
Non-current liabilities
Term borrowings	1022	11.79%	1000	11.71%
Deferred tax	1710	19.73%	1617	18.94%
Provisions	9	0.10%	8	0.09%
Finance lease payable	46	0.53%	47	0.55%
Financial Instruments	124	1.43%	203	2.38%
Term payables	93	1.07%	100	1.17%
Total non-current liabilities	3004	34.67%	2975	34.84%
Total liabilities	3583	41.35%	3488	40.85%
Net assets	5082	58.65%	5050	59.15%
Shareholders' equity
Share capital	1598	18.44%	1597	18.70%
Reserves	3484	40.21%	3453	40.44%
Total shareholders' equity	5082	58.65%	5050	59.15%

Using the following financial ratiosfor 2016 and 2017 periods, and other associated

information available in the publicdomain, assess the financial health of MEL from the

view of an investor.

Liquidity ratios

b) Asset management efficiencyratios

c) Profitability ratios

d) Market ratios

Assume you are a banker evaluating aloan request from Meridian Energy Limited

(MEL) for $220 million. ConsideringMELâs recent earnings announcements and

earnings forecast updates, what wouldbe your concerns in deciding on approval or

denial of the loan request? Use thecompanyâs capital structure ratios for 2016 and 2017

in your explanation.

apricotwallaby871

ACCT-3021EL Chapter Notes - Chapter 17: Stock Split, Income Statement, Financial Statement

Document Summary

Get access

Related Documents

AFM391 Lecture Notes - Lecture 8: Net Income, Income Statement, Financial Instrument

RSM221H1 Chapter Notes - Chapter 17: Dividend, Capital Structure, Stock Split

RSM320H1 Chapter Notes - Chapter 17: Dividend, Capital Structure, Net Income

Related Questions