Financial statement data for the years ended December 31 for Black Bull Inc. are shown below.

Financial statement data for the years ended December 31 for Black Bull Inc. are shown below.








2014 2013
Net income $2,485,700 $1,538,000
Preferred dividends $50,000 $50,000
Average number of common shares outstanding 115,000 shares 80,000 shares




a. Determine the earnings per share for 2014 and 2013.
b. Does the change in the earnings per share from 2013 to 2014 indicate a favorable or an unfavorable trend?


Answer:



















a. 2014: Earnings per Share = Net Income – Preferred Dividends
Avg. Number of Common Shares Outstanding
$2,485,700 – $50,000 = 115,000 shares
$2,435,700 = 115,000 shares
= $21.18
2013: Earnings per Share = Net Income – Preferred Dividends
Avg. Number of Common Shares Outstanding
$1,538,000 – $50,000 = 80,000 shares
$1,488,000 = 80,000 shares
= $18.60
b. The increase in the earnings per share from $18.60 to $21.18 indicates a
favorable trend in the company’s profitability.



Bridger Ski Co. has developed a tract of land into a ski resort. The company has cut the trees, cleared and graded the land and hills, and constructed ski lifts. (a) Should the tree cutting, land clearing, and grading costs of constructing the ski slopes be debited to the land account? (b) If such costs are debited to Land, should they be depreciated?


Answer:
a. Yes. All expenditures incurred for the purpose of making the land suitable for its intended use should be debited to the land account.

b. No. Land is not depreciated.