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The Alford Group had 310,000 shares of common stock outstanding at January 1, 2018. The following...

The Alford Group had 310,000 shares of common stock outstanding at January 1, 2018. The following activities affected common shares during the year. There are no potential common shares outstanding.
  

2018
Feb. 28 Purchased 21,000 shares of treasury stock.
Oct. 31 Sold the treasury shares purchased on February 28.
Nov. 30 Issued 84,000 new shares.
Dec. 31 Net income for 2018 is $909,000.
2019
Jan. 15 Declared and issued a 2-for-1 stock split.
Dec. 31 Net income for 2019 is $909,000.


Required:

1. Determine the 2018 EPS.
2. Determine the 2019 EPS.
3. At what amount will the 2018 EPS be presented in the 2019 comparative financial statements?

(For all requirements, Enter your answers in thousands.)

Solutions

Expert Solution

1.Computation of 2018 EPS.

EPS = Net Income / No of shares outstanding

Net Income = $ 9,09,000

No of shares = 310000 – (21000 x 10/12) + (21000 x 2/12) + (84000 x 1/12)

                     = 310000 – 17500 + 3500 + 7000

                    = 303000 Shares

EPS = $ 909000 / 303000

       = $ 3 / Share

2.Computation of 2019 EPS.

Net Income = $ 9,09,000

No of shares = [ 310000 – 21000 + 21000 + 84000 ] x 2

                      = 7,88,000 Shares

EPS = $ 909000 / 788000 Shares

       = $ 1.15 / Share

3. 2018 EPS be presented in the 2019 comparative financial statements

Net Income = $ 9,09,000

No of shares = 303000 (weighted-average sharesas previously calculated) x 2(stock splitadjustment)

                      = 6,06,000 Shares

EPS = $ 909000 / 606000 Shares

       = $ 1.50 / Share

ekkarill92 answered 1 year ago
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