Christina Corporation is preparing the comparative financial statements to be included in the annual report to stockholders. Christina employs a fiscal year ending May 31. Income from operations before income taxes for Christina was $1,400,000 and $660,000, respectively, for fiscal years ended May 31, 2021 and 2020. Christina experienced a loss from discontinued operations of $400,000 on March 3, 2021. A 20% combined income tax rate pertains to any and all of Christina Corporation's profits, gains, and losses. Christina's capital structure consists of preferred stock and common stock. The company has not issued any convertible securities or warrants and there are no outstanding stock options. Christina issued 40,000 shares of $100 par value, 6% cumulative preferred stock in 2017. All of this stock is outstanding, and no preferred dividends are in arrears. There were 1,000,000 shares of $1 par common stock outstanding on June 1, 2019. On September 1, 2019, Christina sold an additional 400,000 shares of the common stock at $17 per share. Christina distributed a 20% stock dividend on the common shares outstanding on December 1, 2020. These were the only common stock transactions during the past 2 fiscal years. Instructions Determine the weighted-average number of common shares that would be used in computing earnings per share on the current comparative income statement for: The year ended May 31, 2020. The year ended May 31, 2021. Starting with income from operations before income taxes, prepare a comparative income statement for the years ended May 31, 2021 and 2020. The statement will be part of Christina Corporation's annual report to stockholders and should include appropriate earnings per share presentation. The capital structure of a corporation is the result of its past financing decisions. Furthermore, the earnings per share data presented on a corporation's financial statements is dependent upon the capital structure. Explain why Christina Corporation is considered to have a simple capital structure. Describe how earnings per share data would be presented for a corporation that has a complex capital structure.
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
Christina Corporation is preparing the comparative financial statements to be included in the annual report to stockholders. Christina employs a fiscal year ending May 31.
Income from operations before income taxes for Christina was $1,400,000 and $660,000, respectively, for fiscal years ended May 31, 2021 and 2020. Christina experienced a loss from discontinued operations of $400,000 on March 3, 2021. A 20% combined income tax rate pertains to any and all of Christina Corporation's
Christina's capital structure consists of
Christina issued 40,000 shares of $100 par value, 6% cumulative preferred stock in 2017. All of this stock is outstanding, and no preferred dividends are in arrears.
There were 1,000,000 shares of $1 par common stock outstanding on June 1, 2019. On September 1, 2019, Christina sold an additional 400,000 shares of the common stock at $17 per share. Christina distributed a 20% stock dividend on the common shares outstanding on December 1, 2020. These were the only common stock transactions during the past 2 fiscal years.
Instructions
- Determine the weighted-average number of common shares that would be used in computing earnings per share on the current comparative income statement for:
- The year ended May 31, 2020.
- The year ended May 31, 2021.
- Starting with income from operations before income taxes, prepare a comparative income statement for the years ended May 31, 2021 and 2020. The statement will be part of Christina Corporation's annual report to stockholders and should include appropriate earnings per share presentation.
- The capital structure of a corporation is the result of its past financing decisions. Furthermore, the earnings per share data presented on a corporation's financial statements is dependent upon the capital structure.
- Explain why Christina Corporation is considered to have a simple capital structure.
- Describe how earnings per share data would be presented for a corporation that has a complex capital structure.
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