Question Details

clothing manufacturer






Jazzy Juniors, a retail clothing manufacturer, reported the following profit figures in its 2010 annual report.

	2010	2009
Earnings Before Extraordinary Items	$1,726,010 	$1,646,117
		
Extraordinary Loss, Net of Tax	  (346,106) 	         —
(Note 1)		
Net Income	 $1,379,904 	$1,646,117
		
Basic Earnings Per Share:		
Before Extraordinary Items	$     3.13 	$     2.99
Extraordinary Loss, Net of Tax	      (0.63)	         —
Net Income	$     2.50 	$     2.99


Note 1:	On September 3, the firm experienced a substantial fire loss. The uninsured portion of the loss was $547,910. This loss reduced income taxes by $201,804.

Required:
a.	You have been asked to project 2011 earnings for Jazzy Juniors. Your research indicates that a 12% rise in earnings is reasonable. Compute the estimated earnings and basic earnings per share. Explain your answer.
b.	Compute the number of shares of common stock outstanding in 2010, using net income and basic earnings per share of $2.50.
Note: There is no preferred stock outstanding.
c.	Why are the taxes on the casualty loss presented with the loss rather than with income taxes.






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