Atlantic Airlines operated both an airline and several motels located near airports. During the year just ended, all motel operations were discontinued and the following operating results were reported:
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| Continuing operations (airline): |
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| Net sales |
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$ |
57,000,000 |
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| Costs and expenses (including income taxes on continuing operations) |
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42,600,000 |
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| Other data: |
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| Operating income from motels (net of income tax) |
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840,000 |
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| Gain on sale of motels (net of income tax) |
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4,956,000 |
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| Extraordinary loss (net of income tax benefit) |
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3,360,000 |
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The extraordinary loss resulted from the destruction of an airliner by an earthquake. Atlantic Airlines had 1,000,000 shares of capital stock outstanding throughout the year.
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| a. |
Prepare a condensed income statement, including proper presentation of the discontinued motel operations and the extraordinary loss. Include all appropriate earnings per share figures.
| b. |
Assume that you expect the profitability of Atlantic Airlines operations to decline by 5 percent next year, and the profitability of the motels to decline by 10 percent. What is your estimate of the company's net earnings per share next year?
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