Problem 16-06 (Part Level Submission) Monty 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 $1,719,000 and income from continuing operations for the fiscal year ended May 31, 2021, was $2,510,000. In both years, the company incurred a 10% interest expense on $2,335,000 of debt, an obligation that requires interest-only payments for 5 years. The company experienced a loss from discontinued operations of $610,000 on February 2021. The company uses a 20% effective tax rate for income taxes. The capital structure of Monty Corporation on June 1, 2019, consisted of 1,006,000 shares of common stock outstanding and 19,000 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, Monty sold an additional 508,000 shares of the common stock at $20 per share. Monty distributed a 20% stock dividend on the common shares outstanding on January 1, 2020. On December 1, 2020, Monty was able to sell an additional 767,000 shares of the common stock at $22 per share. These were the only common stock transactions that occurred during the two fiscal years. (a) Your answer is correct. Identify whether the capital structure at Monty Corporation is a simple or complex capital structure. Simple Capital Structure SHOW SOLUTION LINK TO TEXT | Your answer is correct. Determine the weighted average number of shares that Monty Corporation would use in calculating earnings per share for the fiscal year ended: Weighted-average number of shares (1) May 31, 2020 1613600 (2) May 31, 2021 2200300 SHOW SOLUTION LINK TO TEXT Prepare, in good form, a comparative income statement, beginning with income from operations, for Monty Corporation for the fiscal years ended May 31, 2020, and May 31, 2021. This statement will be included in Monty's annual report and should display the appropriate earnings per share presentations. (Round earnings per share to 2 decimal places, e.g. $1.55.) MONTY CORPORATION Comparative Income Statement For Fiscal Years Ended May 31, 2020 and 2021 2020 2021 Income From Operations 1719000 2610000 Interest Expense 233500 233500 Income Before Taxes 1485500 2376500 Income Taxes 297100 475300 Income From Continuing Operations 1188400 1901200 TLoss From Discontinued Operations 488000 al 1188400 1413200 Net Income / (Loss) Earnings per share: X x Loss From Discontinued Operations 610000 610000 x Income From Continuing Operations 1188400 274800 X Net Income /(Loss) 578400 1664800
