Problem 19-8 Net loss; stock dividend; nonconvertible preferred stock; treasury shares; shares sold; discontinued operations [LO19-5,...

Problem 19-8 Net loss; stock dividend; nonconvertible preferred stock; treasury shares; shares sold; discontinued operations [LO19-5, 19-6, 19-7, 19-13] On December 31, 2015, Ainsworth, Inc., had 640 million shares of common stock outstanding. Twenty seven million shares of 7%, $100 par value cumulative, nonconvertible preferred stock were sold on January 2, 2016. On April 30, 2016, Ainsworth purchased 30 million shares of its common stock as treasury stock. Twelve million treasury shares were sold on August 31. Ainsworth issued a 5% common stock dividend on June 12, 2016. No cash dividends were declared in 2016. For the year ended December 31, 2016, Ainsworth reported a net loss of $175 million, including an after-tax loss from discontinued operations of $470 million. Required: 1. Compute Ainsworth's net loss per share for the year ended December 31, 2016. (Round your intermediate calculations to 2 decimal places. Negative amounts should be indicated by a minus sign. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) 2. Compute the per share amount of income or loss from continuing operations for the year ended December 31, 2016. (Round your intermediate calculations to 2 decimal places. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) 3. Prepare an EPS presentation that would be appropriate to appear on Ainsworth's 2016 and 2015 comparative income statements. Assume EPS was reported in 2015 as $0.80, based on net income (no discontinued operations) of $512 million and a weighted-average number of common shares of 640 million. (Round your answers to 2 decimal places. Loss amounts should be indicated with a minus sign.)

Solutions

Expert Solution

1)Compute Ainsworth's net loss per share for the year ended December 31, 2016.
EPS = (Net Income - Preferred Dividend)/Weighted average # shares of common stock outstanding
Preferred Dividend =[(7% x $100) x 27 million)]	$189.00	million
Weighted Average shares Outstanding	in Millions				Weighted Average shares Outstanding
Date	Number of Shares	Stock Dividend	Total Shares	Weights	Number of shares x Weights
Jan,1,2016	640	32	672	12/12	672
Jun 1,2016	-30	-1.5	-31.5	8/12	-21
Sep 1,2016	12			4/12	4
				Total number of shares	655	shares
Net Loss per Share = (-$175 - 189)/655	-$0.56	per share


2. Compute the per share amount of income or loss from continuing operations for the year ended December 31, 2016
Income from continuing operations ($470 - $175) million	$295.00
Extraordinary loss, net of tax	-$470.00
Net loss	-$175.00
EPS for continuing operations = ($295 - 189)/655 shares	$0.16	Per Share

3. Prepare an EPS presentation that would be appropriate to appear on Ainsworth's 2016 and 2015 comparative income statements. Assume EPS was reported in 2015 as $0.80, based on net income (no discontinued operations) of $512 million and a weighted-average number of common shares of 640 million.
The 5% stock dividend issued on June 12, 2016 must be retroactively applied to 1/1/15
Weighted average # shares for 2015: 640 x 1.05 =	672	shares
2015 EPS = $512 ÷ 672 =	$0.76
2016 EPS from Extraordinary loss = $470/ 655	$0.72

	2016	2015
EPS from continuing operations	$0.16	$0.76
Extraordinary loss, net of tax	-$0.72	0
EPS	-$0.56	$0.76

jeff jeffy answered 1 year ago

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