Business Finance Assignment 1

Frantic Fast Foods had earnings after taxes of $390,000 in the year 2009 with 300,000 shares outstanding. On January 1, 2010, the firm issued 25,000 new shares. Because of the proceeds from these new shares and other operating improvements, earnings after taxes increased by 20 percent. a. Compute earnings per share for the year 2009. b. Compute earnings per share for the year 2010. 2-1. Solution: 2-3 Chapter 02: Review of Accounting Frantic Fast Foods a. Year 2009 Earnings per share = Earnings after taxes Shares outstanding = $390,000 = $1.30 300,000 b. Year 2010 Earnings after taxes = $390,000 1.20 = $468,000 Shares outstanding = 300,000 + 25,000 = 325,000 Earnings per share = $468,000 = $1.44 325,000

Prepare in good form an income statement for Virginia Slim Wear. Take your calculations all the way to computing earnings per share. Sales....................................................................................... $600,000 Shares outstanding................................................................. 100,000 Cost of goods sold.................................................................. 200,000 Interest expense...................................................................... 30,000 Selling and administrative expense........................................ 40,000 Depreciation expense............................................................. 20,000 Preferred stock dividends....................................................... 80,000 Taxes...................................................................................... 100,000 2-9. Solution: Virginia Slim Wear Income Statement Sales............................................................. $600,000 Cost of goods sold........................................ 200,000 Gross profit.............................................. 400,000 Selling and administrative expense............... 40,000 Depreciation expense.................................... 20,000 Operating