Question

Prepare an income statement for Franklin Kite Co. Take your calculations all the way to computing earnings per share.

Sales	$900,000
Shares outstanding	50,000
Cost of goods sold	400,000
Interest expenses	40,000
Selling and administration expenses	60,000
Depreciation expenses	20,000
Preferred stock dividend	80,000
Taxes	50,000

Short answer

The earning per share is $5.

Step-by-step solution

Earning per share

Earning per share is computed to know the company’s earnings for each share of its stockand is widely used by the users of the organization for estimating the corporate values.

Income statement for Franklin Kite Co.

Particulars	Amount ($)
Sales	900,000
Less: Cost of goods sold	400,000
Gross profit	500,000
Less: Selling and administrative expenses	60,000
Less: Depreciation expenses	20,000
Less: Interest Expenses	40,000
Operating income	380,000
Less:Taxes	50,000
Net income after tax	330,000
Less: Preferred stock dividend	80,000
Income available for shareholders	250,000
No. of shares outstanding	50,000
Earnings per Share	5