In: Accounting
Financial statement data for the years ended December 31 for Dovetail Corporation follow:
20Y3 | 20Y2 | |||
Net income | $1,099,000 | $913,250 | ||
Preferred dividends | $168,000 | $168,000 | ||
Average number of common shares outstanding | 70,000 | shares | 55,000 | shares |
a. Determine the earnings per share for 20Y3 and 20Y2. Round your answers to two decimal places.
20Y3 | $ per share |
20Y2 | $ per share |
b. Does the change in the earnings per share from 20Y2 to 20Y3 indicate a favorable or an unfavorable trend?
(a Earnings Per Share
Earnings Per Share - 20Y3
EPS = Net Income / No of shares outstanding
Net Income = $1,099,000 Minus Preferred dividends
= $1,099,000 - $168,000
= $9,31,000
Number of shares of common stock outstanding = 70,000 Shares
EPS = $9,31,000 / 70,000
= $13.30 per share
Earnings Per Share - 20Y2
EPS = Net Income / No of shares outstanding
Net Income = $913,250 Minus Preferred dividends
= $913,250 - $168,000
= $7,45,250
Number of shares of common stock outstanding = 55,000 Shares
EPS = $7,45,250 / 55,000
= $13.55 per share
(b) Yes. It is a favorable indication. Since there is a increase change in EPS from $13.30 to $13.55