13 14 QUESTION 5 Earnings per share (EPS) Is calculated based on the weighted-av

Question

13 14 QUESTION 5 Earnings per share (EPS) Is calculated based on the weighted-average number of common shares: A.in the treasury. B. outstanding 1D. issued. QUESTION 6 As of April 15, 2011, Baylor Software, Inc. has issued 500,000 of its 1,000,000 authorized shares of $20 par value common stock, of which 40,000 shares have been reacquired as treasury stock. On April 15, 2012, the board of directors declared a cash dividend of $1.70 per share to be paid on May 20 to stockholders of record on May 5. The journal entry, If any, for April 15 would include: @A a debit to Retained Earnings of $850,000. B. no entry is required on this date. @ C a credit to Dividends Payable of $782,000 D. a credit to Stock Dividends Distributable of $782,000. QUESTION 7

Explanation / Answer

Solution : Ans 5 : B outstanding

EPS earnings per share represents that portion of companies earning which is net of taxes and preferred stock dividend allocated to each share of outstanding stock. The figure can be calculated by dividing net profit with the total number of outstanding common stock. Because the number of shares outstanding can fluctuate, a weighted average is typically used.

Ans 6: C - credit to dividends payable of $ 782000.

For the above mentioned example, entries could be provided as follows :

1. On shares issued

Cash account debit - $10000000

Common stock account credit - $10000000

2. Shares reacquired

Treasury stock account debit - $800000 ( 40000*20)

Cash account credit -$800000

3. Dividends payable entry

Retained earnings account debit -$782000 ( 460000*1.70)

Dividends payable account -$782000

according to this entry retained earnings balance has a amount debited with 782000 and dividend payable account with credit of same amount.

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