At December 31, 2015, Albrecht Corporation had outstanding 328,000 shares of com
ID: 2565266 • Letter: A
Question
At December 31, 2015, Albrecht Corporation had outstanding 328,000 shares of common stock and 14,000 shares of 9.5%, $100 par value cumulative, nonconvertible preferred stock. On May 31, 2016, Albrecht sold for cash 12,000 shares of its common stock. No cash dividends were declared for 2016. For the year ended December 31, 2016, Albrecht reported a net loss of $1,140,000.
Calculate Albrecht's net loss per share for the year ended December 31, 2016.
At December 31, 2015, Albrecht Corporation had outstanding 328,000 shares of common stock and 14,000 shares of 9.5%, $100 par value cumulative, nonconvertible preferred stock. On May 31, 2016, Albrecht sold for cash 12,000 shares of its common stock. No cash dividends were declared for 2016. For the year ended December 31, 2016, Albrecht reported a net loss of $1,140,000.
Explanation / Answer
Given,
Net Loss for Year 2016 is $1,140,000
No Cash Dividends declared for 2016.
(Hence, No Dividend payout for both Common stock and also Preferred Stock as one can infer Poor Financial condition of company from the Reported Net Loss.
Since Preferred stock is Cummulative The dividend they are eligible to receive @9.5% on their par value of $100 per share will be recognised as a liability for the year ended 2016 itself)
As on December 31, 2015:
328,000 Common Stock
14,000 Shares of 9.5% Cummulative Non-Convertible Preferred Stock
As on December 31, 2016
340,000 Common Stock (328,000+12,000 issued on May 31,2016)
14,000 Shares of 9.5% Cummulative Non-Convertible Preferred Stock
Net loss per share (In case of Profit)
(Net Income - Dividend Paid or Payable to Cummulative Preferred Stock) / Weighted Average Number of shares Outstanding
Net loss per share (In case of Loss)
(Net Loss + Dividend Paid or Payable to Cummulative Preferred Stock) / Weighted Average Number of shares Outstanding)
So, We will calculate Weighted Average No.of shares Outstanding as on December 31, 2016
Weighted Average No.of Shares = No.of Shares * Portion of year they are outstanding.
= 328,000 shares * 12 Months/ 12 Months + 12,000 shares * 7 months (June to December)/12 months
=328,000 shares + 7,000 shares = 335,000 shares
Dividend payable on Cummulative Preferred Stock for 2016
= $100 par value * 14,000 shares * 9.5% per annum
= $133,000
Finally, We calculate Net loss per share as follows:
Net loss per share (In case of Loss) =
Net Loss + Dividend Paid or Payable to Cummulative Preferred Stock) / Weighted Average Number of shares Outstanding)
= $1,140,000 + $133,000 / 335,000 Shares
Loss per share = $ 3.8 per share of common stock.
(NOTE: Loss per share is calculated only on No.of share holders of Common stock and preference stock holders are not taken into account as Real owners of the company are Common Stock holders)
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