Builtrite had sales of $4,000,000 in 2011. Cost of goods sold were calculated at 70% of sales. Builtrite’s operating expenses were $700,000 which included depreciation expense. Bonds with a total par value of $2,000,000 were outstanding and had a 4% coupon rate. Builtrite received $150,000 in dividends from stock owned and paid out $40,000 in dividends to its preferred stockholders. Builtrite sold stock that it had purchased in 2009 and realized a $60,000 capital gain.
a) Calculate Builtrite’s taxable income and tax liability.
b) What are Builtrite’s true earnings per share if Builtrite has 500,000 shares of common stock?