The equity section of Sosa SA appears below as of December 31, 2019 — Net income for reflects total effective tax rate Included figure loss 000

The equity section of Sosa SA appears below as of December 31, 2019.

Net income for 2019 reflects a total effective tax rate of 20%. Included in the net income figure is a loss of R$12,000,000 (before tax) as a result of discontinued operations. Preference dividends of R$270,000 were declared and paid in 2019. Dividends of R$1,000,000 were declared and paid to ordinary shareholders in 2019.

Instructions

Compute earnings per share data as it should appear on the income statement of Sosa SA.

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Computation of net income:
2019 net income after tax		R$33,000,000
2019 net income before tax
[R$33,000,000 ÷ (1 – .20)]		41,250,000
Add back discontinued operations loss		12,000,000
Income before income tax		53,250,000
Income taxes (20% X R$53,250,000)		10,650,000
Income from continuing operations		42,600,000
Discontinued operations:
Loss from discontinued operations	R$12,000,000
Less: Applicable income tax reduction	2,400,000	9,600,000
Net income		R$33,000,000

Net income		R$33,000,000
Less: Provision for preference dividends
(6% of R$4,500,000)		270,000
Income available to ordinary shareholders		32,730,000
Ordinary shares		÷ 10,000,000
Earnings per share		R$3.27*
Income statement presentation
Earnings per share:
Income from continuing operations		R$4.23a
Discontinued operations, net of tax		(0.96)b
Net income		R$3.27

The equity section of Sosa SA appears below as of December 31, 2019 — Net income for reflects total effective tax rate Included figure loss 000

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SOLUTION