E4-12 (Earnings per Share) At December 31, 2003, Shiga Naoya Corporation had the following stock

outstanding.

10% cumulative preferred stock, $100 par, 107,500 shares $10,750,000

Common stock, $5 par, 4,000,000 shares 20,000,000

During 2004, Shiga Naoya’s only stock transaction was the issuance of 400,000 shares of common on
April 1. The following also occurred during 2004.

Income from continuing operations before taxes $23,650,000

Discontinued operations (loss before taxes) $ 3,225,000

Preferred dividends declared $ 1,075,000

Common dividends declared $ 2,200,000

Effective tax rate 35%

Instructions:

Compute earnings per share data as it should appear in the 2004 income statement of Shiga Naoya
Corporation.
Net Income:

Income from continuing operations

Before Income tax .................................................... $ 23,650,000

Income Tax …………. ………………… 8,277,500

Income from continuing operations ………………………15,372,500

Discontinued Operation:

Loss before Income tax ...................... 15,372,500

Less: Applicable tax reduction ………… (1,128,750) 2,096,250

Net Income ……………………………………………… 13,276,250

Preferred Dividend declared ………………………… 1,075,000

Weighted average common share outstanding ………. 4,000,000

Earning per share

Income from continuing operations ……………………… $ 3.57

Discontinued operating net of tax …………………………..(0.52)

Net Income…………………………………………………………. $ 3.05