In: Accounting
_____4. Evie Corp, has the following Stockholders’ Equity account balances and activity for Year 2.
Net income |
$8,500,000 |
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Retained earnings |
$5,955,000 |
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Preferred stock shares outstanding |
1,000 |
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Common stock shares outstanding at January 1, Yr 2 |
3,750,000 |
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Additional Common shares issued at July 1, Yr 2 |
10,000 |
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2-for-1 stock split at December 31, Yr 2 |
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Preferred Dividends |
$15,000 |
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Common Dividends |
$75,000 |
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Year 1 EPS |
$2.20 |
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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 |
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Stock split 2-for-1 |
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*Total Weighted Average, 12/31/Y2 |
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Note: Year 1 restated |
$2.20 / 2 =_____ |
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 |
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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)