Two companies are financed as follows: X Co. Y Co. Bonds payable, 9% issued at face $5,000,000 $3,000,000 Common stock, $25 par 3,000,000 3,000,000 Income tax is estimated at 40% of income for both companies. Determine for each company the earnings per share of common stock, assuming that the income before bond interest and income taxes is $2,280,000 each. Round your answers to two decimal places. Earnings per Share on Common Stock X Co. $fill in the blank 1 Y Co. $fill in the blank 2

Two companies are financed as follows: X Co. Y Co. Bonds payable, 9% issued at face $5,000,000 $3,000,000 Common stock, $25 par 3,000,000 3,000,000 Income tax is estimated at 40% of income for both companies. Determine for each company the earnings per share of common stock, assuming that the income before bond interest and income taxes is $2,280,000 each. Round your answers to two decimal places. Earnings per Share on Common Stock X Co. $fill in the blank 1 Y Co. $fill in the blank 2

Financial Accounting

15th Edition

ISBN:9781337272124

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter14: Long-term Liabilities: Bonds And Notes

Section: Chapter Questions

Problem 1PEB: Brower Co. is considering the following alternative financing plans: Income tax is estimated at 40%...

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Brower Co. is considering the following alternative financing plans: Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming that income before bond interest and income tax is 2,000,000.
Below is select information from two, independent companies. Additional information includes: On January 1, Company A issued a 5-year $1,500,000 bond with at 6% stated rate. Interest is paid semiannually and the bond was sold at 105.5055 to yield a market rate of 4.75%. On January 1, Company B sold $1,500,000 of common stock and paid dividends of $75,000. A. Prepare an income statement for each company (ignore taxes) B. Explain why the net income amounts are different, paying particular attention to the operational performance and financing performance of each company. (Hint: it may be helpful for you to create an amortization table).
Two companies are financed as follows: X Co. Y Co. Bonds payable, 9% issued at face $5,000,000 $3,000,000 Common stock, $25 par 3,000,000 3,000,000 Income tax is estimated at 40% of income. Determine for each company the earnings per share of common stock, assuming that the income before bond interest and income taxes is $2,280,000 each.
BSF Co., which produces and sells skiing equipment, is financed as follows: Bonds payable, 8% (issued at face amount) $7,500,000 Preferred 2% stock, $10 par 7,500,000 Common stock, $50 par 7,500,000 Income tax is estimated at 40% of income. Round your answers to the nearest cent. a. Determine the earnings per share of common stock, assuming that the income before bond interest and income tax is $1,000,000.$ b. Determine the earnings per share of common stock, assuming that the income before bond interest and income tax is $3,000,000.$ c. Determine the earnings per share of common stock, assuming that the income before bond interest and income tax is $4,500,000.$
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