The Alford Group had 202.000 shares of common stock outstanding at January 1, 20
ID: 2516474 • Letter: T
Question
The Alford Group had 202.000 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 Oct. 31 Nov. 30 Dec. 31 2019 Jan. 15 Dec. 31 Purchased 6,000 shares of treasury stock Sold the treasury shares purchased on February 28 Issued 24,000 new shares Net income for 2018 is $400,000 Declared and issued a 2-for-1 stock split Net income for 2019 is $400,000 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?Explanation / Answer
SOLUTION
(1) Numerator-
Net Income = $400,000, Preferred dividends = $0
Denominator: Weighted average no. of shares
2018 EPS = $400,000 / 200,000 = $2.00
(2) Numerator: Net Income = $400,000; Preferred dividends = $0
Denominator: Weighted average no. of shares
1/1 - 12/31 202,000 - 6,000 + 6,000 + 24,000 = 226,000 * 2 = 452,000
2019 EPS = $400,000 / 452,000 = $0.88
(3) For comparative purposes, the 2-for-1 stock split in 2019 needs to be retroactively applied to the earliest date being presented, i.e.January 1, 2018
For Comparative purpose:
2018 EPS - $400,000 / 400,000 = $1.00
2019 EPS - $400,000 / 452,000 = $0.88
Period Calculation No. of shares 1/1 - 12/31 202,000 * (12/12) 202,000 2/28 - 12/31 (6,000) * (10/12) (5,000) 10/31 - 12/31 6,000 * (2/12) 1,000 11/30 - 12/31 24,000 * (1/12) 2,000 Weighted average no.of shares outstanding 200,000Related Questions
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