Pharoah Corporation is preparing the comparative financial statements for the annual report to its shareholders for fiscal years ended May 31, 2017, and May 31, 2018. The income from operations for the fiscal year ended May 31, 2017, was $1,827,000and income from continuing operations for the fiscal year ended May 31, 2018, was $2,536,000. In both years, the company incurred a10% interest expense on $2,376,000of debt, an obligation that requires interest-only payments for 5 years. The company experienced a loss from discontinued operations of $585,000on February 2018. The company uses a40% effective tax rate for income taxes.

The capital structure of Pharoah Corporation on June 1, 2016, consisted of1,018,000shares of common stock outstanding and19,200shares of $50par value,7%, cumulative preferred stock. There were no preferred dividends in arrears, and the company had not issued any convertible securities, options, or warrants.

On October 1, 2016, Pharoah sold an additional507,000shares of the common stock at $20per share. Pharoah distributed a20% stock dividend on the common shares outstanding on January 1, 2017. On December 1, 2017, Pharoah was able to sell an additional817,000shares of the common stock at $22per share. These were the only common stock transactions that occurred during the two fiscal years.