_____4. Evie Corp, has the following Stockholders’ Equity account balances and activity for Year 2. Net...

_____4. Evie Corp, has the following Stockholders’ Equity account balances and activity for Year 2.

Net income		$8,500,000
Retained earnings	$5,955,000

Preferred stock shares outstanding	1,000
Common stock shares outstanding at January 1, Yr 2	3,750,000
Additional Common shares issued at July 1, Yr 2	10,000
2-for-1 stock split at December 31, Yr 2
Preferred Dividends	$15,000
Common Dividends	$75,000
Year 1 EPS	$2.20

Earnings per share = 8500000/ 3,755,000* = 2.26

* Compute Denominator: Weighted average common shares outstanding

Date	Shares	Portion of year	Weighted Average Shares
January 1, Y2	3,750,000	12	3,750,000
July 1, Y2	10,000	6	5,000
Weighted Average December 31 before split
Stock split 2-for-1
*Total Weighted Average, 12/31/Y2
Note: Year 1 restated			$2.20 / 2 =_____

Expert Solution

Earnings Per Share = $1.13 per share

Earnings Per Share = Net Income for common stock holders/ Weighted Average Shares Outstanding

Net Income for common stock holders = Net Income – Preferred Dividend

= $85,00,000 - $15,000

= $ 84,85,000

Weighted Average Shares Outstanding

Date	Shares	Portion of year	Weighted Average Shares
January 1, Y2	37,50,000	12 Months	37,50,000
July 1, Y2	10,000	6 Months	5,000
Weighted Average December 31 before split			37,55,000
Stock split 2-for-1	37,55,000	12 Months	37,55,000
*Total Weighted Average, 12/31/Y2			75,10,000

Earnings Per Share = $ 84,85,000 / 75,10,000 Shares

= $1.13 per share (Rounded to two decimal)

ekkarill92 answered 2 years ago

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