Burke Company shows the following condensed income statement information for the year ended December 31, 2007: Income

Question:

Burke Company shows the following condensed income statement information for the year ended December 31, 2007:

Income before extraordinary items ........... $29,936

Less: Extraordinary loss (net of income tax credit) ..... (2,176)

Net income ................... $27,760

The company declared dividends of $6,000 on preferred stock and $17,280 on common stock. At the beginning of 2007, 10,000 shares of common stock were outstanding. On May 4, 2007 the company issued 2,000 additional common shares, and on October 19, 2007 it issued a 20% stock dividend on its common stock. The preferred stock is not convertible.

Required

1. Compute the 2007 basic earnings per share.

2. Show the 2007 income statement disclosure of basic earnings per share.

3. Draft a related note to accompany the 2007 financial statements.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...