Q2. Custom Cuts Landscaping year-end balance sheet lists current assets ast $458,600, fixed assets at $658,200, current liabilities of $425,950, and long term debt of $395,450. Calculate Custom Cut's shareholder equity.

the shareholder equity is $295,400

Explanation:

The computation of the shareholder equity is given below:

We know that

Assets = liabilities + stockholder equity

$458,600 + $658,200 = $425,950 + $395,450 + shareholder equity

So, the shareholder equity is

= $1,116,800 - $425,950 - $395,450

= $295,400

Hence, the shareholder equity is $295,400

Explanation:

Basic and diluted Eps

Basic EPS = profit after tax-preference share dividend / w. Avg No.of shares

Basic Eps

Income            270000

Tax20%          54000

Pat                  216000

Dividend5*5000  -25000

                191000

W.Avg No. shares 50000

Basic EPS191/503.82

Diluted Eps

PAT                                                                                               191000

Add back Dividend of assumed conversion of pref. shares     25000

Total Income                                                                               216000

Total No of share                                                                         60000*

Diluted Eps   216000/60000                                                        3.6

*Common Stock                                                            = 50000

Add Assumed Conversion of Pref. shares = 5000*2 = 10000

Total Shares                                                                   = 60000