Question

A firm has the following accounts and financial data for 2007:

Sales Revenue $ 3,060 Cost of goods sold $1,800
Accounts Receivable 500 Preferred stock dividends 18
Interest expense 126 Tax rate 40%
Total operating expenses 600 Number of shares of common
Accounts payable 240 stocks outstanding 1,000

The firm's earnings available to common shareholders for 2007 are __________.

Answer 1

Answer:

The correct answer is $302.40.

Explanation:

According to the scenario, the computation can be done as:

To calculate firms' earning first we less cost of goods and total operating expenses from sales revenue:

= $3,060 - $1,800 - 600

= $660

Now we deduct the interest expense, then

= $660 - $126

= $534

Now we deduct tax rate, then

= $534 × $213.60    ( $534× 40%)

= $320.40

Now we finally deduct the dividends to get the firm's earning to common shareholder's, then

= $320.40 - 18

= $302.40

Hence, the firm's earning to common shareholder's is $302.40.