Financial statement data for the years ended December 31 for Dovetail Corporation follow: 20Y3 20Y2 Net...

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?

Solutions

Expert Solution

(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

ekkarill92 answered 1 year ago

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