Section 1:
The annual income statements for Cortez, Inc., as reported when they were initially published in 2003, 2004, and 2005 follow:
2003 2004 2005
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . $370,000 $425,000 $412,500
Operating expenses . . . . . . . . . . . . . . . . . . .232,500 260,000 245,500
Income from continuing operations . . . . . . 137,500 165,000 167,000
Loss on discontinued segment . . . . . . . . . . (52,500) ? ?
Income before extraordinary items . . . . . . . . 85,000 165,000 167,000
Extraordinary gain (loss) . . . . . . . . . . . . . . . ? 33,000 (70,000)
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 85,000 $198,000 $ 97,000
The company also experienced changes in the number of outstanding shares from the following events:
Outstanding shares on December 31, 2002 . . . . . . . 40,000
2003
Treasury stock purchase on April 1 . . . . . . . . . . . . . - 4,000
Issuance of new shares on June 30 . . . . . . . . . . . . . . + 12,000
10% stock dividend on October 1 . . . . . . . . . . . . . . + 4,800
Outstanding shares on December 31, 2003 . . . . . . . 52,800
2004
Issuance of new shares on July 1 . . . . . . . . . . . . . . . + 16,000
Treasury stock purchase on November 1 . . . . . . . . . - 4,800
Outstanding shares on December 31, 2004 . . . . . . . 64,000
2005
Issuance of new shares on August 1 . . . . . . . . . . . . . + 20,000
Treasury stock purchase on September 1 . . . . . . . . . - 4,000
3-for-1 stock split on October 1 . . . . . . . . . . . . . . . +160,000
Outstanding shares on December 31, 2005 . . . . . . . 240,000
Need to do:
1. Compute the weighted average of the common shares outstanding for year 2003.
2. Compute the EPS component amounts to report with the year 2003 income statement for: income from continuing operations, the loss on discontinued segment, and net income.
3. Compute the weighted average of the common shares outstanding for year 2004.
4. Compute the EPS component amounts to report with the year 2004 income statement for: income from continuing operations, the extraordinary gain, and net income.
5. Compute the weighted average of the common shares outstanding for year 2005.
6. Compute the EPS component amounts to report with the year 2005 income statement for: income from continuing operations, the extraordinary loss, and net income.
Analysis Component
7. Explain how you would use the EPS data from part 6 to predict EPS for 2006.
Section 2:
Refer to Krispy Kreme's financial statements (krispy kreme attached) to answer the following:
1. Has Krispy Kreme issued any preferred stock? If so, what are its features?
2. How many shares of common stock are issued and outstanding at the end of fiscal years 2003 and 2002? How do these numbers compare with the weighted-average common shares outstanding at the end of fiscal years 2003 and 2002?
3. What is the book value of its entire common stock at February 2, 2003?
4. What is the total amount of cash dividends paid to common stockholders for fiscal years 2003 and 2002?
5. Identify and compare basic EPS amounts across years 2003, 2002, and 2001. Identify and comment on any significant changes.
6. Does Krispy Kreme hold any treasury stock as of February 2, 2003? As of February 3, 2002?
7. Does Krispy Kreme report any changes in accounting principles or the occurrence of extraordinary items for fiscal years 2003 or 2002? Are there gains or losses on disposal of a business segment for fiscal years 2003 or 2002?