Example p$15-6$

Milton corporation is preparing the comparative financial statements for the annual report to shareholders for fiscal year ended May $31,2025$ and May $31,2026$ the income from operations for the fiscal year ended May $31,2025$ was $$1,800,000.$ An

income from continuing operations for the fiscal year ended May $31,2026$ was $$2,500,000.$ In both years, the company incurred a $10\%$ interest expense on $$2,400,000$ of debt, an obligation that requires interest only payments for five years. The company experienced a loss from discounted operations of $$600,000$ in February $2026.$ The company uses a $20\%$ effective tax rate for income taxes.

The capital structure of Milton corporation on June $1,2024$ consisted of $1$ million shares of common stock outstanding and $20,000$ shares of $$50$ par value, $6\%,$ cumulative preferred stock. There were no preferred dividends in arrears, and the company has not issued any convertible securities$,$ options, or warrents.

On October $1,2024,$ Milton sold an additional $500,000$ shares of the Commons stock at $$20$ per share. Melon distributed at $20\%$ stock dividend on the common shares outstanding on January $1,2025.$ On December $1,2025,$ Milton was able to sell an addition of $800,000$ shares of common stock at $$22$ per share. These were the only common stock trans actions that occurring the two fiscal years.

A$.$ Identify whether the capital structure at Milton corporation is a simple or complex capital structure and explain why

B$.$ Determine the weighted average number of shares that Milton corporation would use in calculating earnings per share for the fiscal year ended

a$.5/31/2025$

b$.5/31/2026$

C$.$ Prepare a good form, a comparative income statement, beginning with income from operations, for Milton corporation for the fiscal year ended May $31,2025,$ and May $31,2026.$ This statement will be included nuns annual report and to display the appropriate earnings per share presentations.