The CPA firm you are working for has just taken on a new client. The firm has just learned that the new client will soon be on the cover of a well-known magazine, the firm is very concerned the work they produce is outstanding in every aspect. That is why the firm has chosen your team to work on the assignment. In a meeting in the main conference room you learn the following.
The Dakota Fanning Corp. has 100,000 shares of common stock outstanding. In 2011, the company reports income from continuing operations before taxes of $1,210,000. Additional transactions not considered in the $1,210,000 are as follows.
1. In 2011, The Dakota Fanning Corp. sold equipment for $40,000. The machine had originally cost $80,000 and had accumulated depreciation of $36,000. The gain or loss is considered ordinary.
2. The Dakota Fanning Corp. discontinued operations of one of its subsidiaries during the current year at a loss of $190,000 before taxes. Assume that this transaction meets the criteria for discontinued operations. The loss on operations of the discontinued subsidiary was $90,000 before taxes; the loss from disposal of the subsidiary was $100,000 before taxes.
3. In 2011, The Dakota Fanning Corp. reviewed its accounts receivable and determined that $26,000 of accounts receivable that had been carried for years appeared unlikely to be collected.
4. An internal audit discovered that amortization of intangible assets was understated by $35,000 (net of tax) in a prior period. The amount was charged against retained earnings.
5. The Dakota Fanning Corp. sold its only investment in common stock during the year at a gain of $145,000. The gain is taxed at a total effective rate of 40%. Assume that the transaction meets the requirements of an extraordinary item.
The owner and managing partner has just come into the conference room and instructs your team to analyze the above information and prepare an income statement for the year 2011, starting with income from continuing operations before income taxes.
Compute earnings per share as it should be shown on the face of the income statement.