Atlantic Airlines operated both an airline and several motels located near airports. During the year just ended,
Question:
Continuing operations (airline):
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $55,120,000
Costs and expenses (including income taxes on continuing operations) . . . . 43,320,000
Other data:
Operating income from motels (net of income tax) . . . . . . . . . . . . . . . . . . . . . 864,000
Gain on sale of motels (net of income tax) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,956,000
Extraordinary loss (net of income tax benefit) . . . . . . . . . . . . . . . . . . . . . . . . . 3,360,000
The extraordinary loss resulted from the destruction of an airliner by an earthquake. Atlantic Air-lines had 1,000,000 shares of capital stock outstanding throughout the year.
Instructions
a. Prepare a condensed income statement, including proper presentation of the discontinued motel operations and the extraordinary loss. Include all appropriate earnings per share figures.
b. Assume that you expect the profitability of Atlantic Airlines operations to decline by 5 percent next year, and the profitability of the motels to decline by 10 percent. What is your estimate of the company’s net earnings per share next year?
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Related Book For
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello
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