Problem 16-06

Not sure how I am getting EPS incorrect...

Problem 16-06 Melton Corporation is preparing the comparative financial statements for the annual report to its shareholders for fiscal years ended May 31, 2020, and May 31, 2021. The income from operations for the fiscal year ended May 31, 2020, was $1,800,000 and income from continuing operations for the fiscal year ended May 31, 2021, was $2,500,000. In both years, the company incurred a 10% interest expense on $2,400,000 of debt, an obligation that requires interest-only payments for 5 years. The company experienced a loss from discontinued operations of $600,000 on February 2021. The company uses a 20% effective tax rate for income taxes. The capital structure of Melton Corporation on June 1, 2019, consisted of 1,000,000 shares of common stock outstanding and 20,000 shares of $50 par value, 6%, 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, 2019, Melton sold an additional 500,000 shares of the common stock at $20 per share. Melton distributed a 20% stock dividend on the common shares outstanding on January 1, 2020. On December 1, 2020, Melton was able to sell an additional 800,000 shares of the common stock at $22 per share. These were the only common stock transactions that occurred during the two fiscal years. Your answer is correct. Identify whether the capital structure at Melton Corporation is a simple or complex capital structure. T Simple Capital Structure SHOW SOLUTION LINK TO TEXT Your answer is correct. Determine the weighted average number of shares that Melton Corporation would use in calculating earnings per share for the fiscal year ended: Weighted average number of shares 1600000 (1) May 31, 2020 (2) May 31, 2021 2200000 SHOW SOLUTION LINK TO TEXT Your answer is partially correct. Try again. Prepare, in good form, a comparative income statement, beginning with income from operations, for Melton Corporation for the fiscal years ended May 31, 2020, and May 31, 2021. This statement will be included in Melton's annual report and should display the appropriate earnings per share presentations. (Round earnings per share to 2 decimal places, e.g. $1.55.) MELTON CORPORATION Comparative Income Statement For Fiscal Years Ended May 31, 2020 and 2021 2020 2021 TIncome From Operations 1800000 2500000 Tinterest Expense 240000 240000 TIncome Before Taxes 1560000 2260000 TIncome Taxes 312000 452000 TIncome From Continuing Operations 1248000 1808000 TLoss From Discontinued Operations 480000 1248000 1328000 1 Net Income / (Loss) Earnings per share: Income From Continuing Operations 0.78 0.82 TLoss From Discontinued Operations 0.22 Net Income / (Loss) 0.78 0.60 Click if you would like to Show Work for this question: Open Show Work