Question

On December 31, 2020, Ainsworth, Inc., had 600 million shares of common stock outstanding. Ninteen million shares of 8%, $100 par value cumulative, nonconvertible preferred stock were sold on January 2, 2021. On April 30, 2021, Ainsworth purchased 50 million shares of its common stock as treasury stock. Twenty million treasury shares were sold on August 31. Ainsworth issued a 4% common stock dividend on June 12, 2021. No cash dividends were declared in 2021. For the year ended December 31, 2021, Ainsworth reported a net loss of $140 million, including an after-tax loss from discontinued operations of $400 million.

Required:
1. Compute Ainsworth's net loss per share for the year ended December 31, 2021.
2. Compute the per share amount of income or loss from continuing operations for the year ended December 31, 2021.
3. Prepare an EPS presentation that would be appropriate to appear on Ainsworth's 2021 and 2020 comparative income statements. Assume EPS was reported in 2020 as $0.75, based on net income (no discontinued operations) of $450 million and a weighted-average number of common shares of 600 million.

Answer 1

- 140 Answer: 1. Loss of the year Add; Cumulative Pref.Devidend (19*8%*100) Total Loss -1521 -292 Calculation of weighted Average no. of share Share at January 1 Treasury stock 600 x1.04 -501 x1 12 *4/12 624) -34.67 6.67 596 Issuance 201x1 Net loss per share = -292 / 596 = -0.49 per share 2 -140 Per share income from continuing operation Loss Add: Loss from Discontinued Operation Income from continuing operation Less: Cumulative Pref. Devidend (19*8%*100) Net income 400 260 - 152 108 Income from continuing operation per share =108 / 596 =0.18 per share w Weighted average number of shares for 2020: 600 x 1.04 = 624 2020 EPS = $450 /624 = $0.72 2016 EPS from Extraordinary loss = $(400) /596 = $(0.67) 2021 2020 Comparative Income statement Earning per share Income from Continuing Operation Loss from Discontinued Operations Net Incomes(loss) 0.18 0.72 -0.67 -0.49 0.72