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Chapter 13: Q13SE (page 710)

Reporting earnings per share

Return to the ABC data in Short Exercise S13-12. ABC had 8,000 shares of common stock outstanding during 2018. ABC declared and paid preferred dividends of $4,000 during 2018.

Show how ABC reports EPS data on its 2018 income statement.

Short Answer

Expert verified

Report shows Income from continuous operation EPS is $0.93, Discontinued operations EPS is $0.27 and Net Income EPS is $1.21.

Step by step solution

01

Computation

IncomefromContinousOperationPerShare=IncomefromContinousOperation-DividendNumberofShares=$11,468-$4,0008,000=$0.93

DiscontinuedOperationPerShare=GainonDiscontinuedOperationNumberofShares=$2,1968,000=$0.27

NetIncomePerShare=NetIncome-DividendNumberofShares=$13,664-$4,0008,000=$1.21

02

Reporting EPS-

ABC Corporation

Income Statement

Dec 31, 2018

Earnings per share of common stock (8,000 outstanding shares)

Income from continuous operation

$0.93

Discontinued operations

$0.27

Net Income

$1.21

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Most popular questions from this chapter

Question - Describing corporation characteristics

Due to recent beef recalls, Southwest Steakhouse is considering incorporating. Bob, the owner, wants to protect his personal assets in the event the restaurant is sued.

Requirements

1. Which advantage of incorporating is most applicable? What are other advantages of organizing as a corporate entity?

What is the effect on the accounting equation when cash dividends are declared?

What is the effect on the accounting equation when cash dividends are paid?

Journalizing dividend and treasury stock transactions, preparing a statement of retained earnings, and preparing stockholders’ equity

The balance sheet of Goldstein Management Consulting, Inc. at December 31, 2017, reported the following stockholders’ equity:

Common Stock—\(10 Par Value; 350,000 shares

authorized, 32,000 shares issued and outstanding

Paid-In Capital:

160,000

\) 320,000

650,000

Retained Earnings

Total Stockholders’ Equity \( 810,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 330,000

Total Paid-In Capital

During 2018, Goldstein completed the following selected transactions:

Feb. 6 Declared a 15% stock dividend on common stock. The market value of

Goldstein’s stock was \)25 per share.

15 Distributed the stock dividend.

Jul. 29 Purchased 2,300 shares of treasury stock at \(25 per share.

Nov. 27 Declared a \)0.10 per share cash dividend on the common stock outstanding.

Requirements

3. Prepare the stockholders’ equity section of the balance sheet at December 31, 2018.

Computing dividends on preferred and common stock and journalizing

Northern Communications has the following stockholders’ equity on December 31,

2018:

Preferred Stock—5%, \(11 Par Value; 150,000 shares authorized, 20,000 shares issued and outstanding

Paid-In Capital:

\) 220,000

760,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 680,000

Total Paid-In Capital 1,660,000

Retained Earnings 200,000

Total Stockholders’ Equity \( 1,860,000

Common Stock—\)2 Par Value; 575,000 shares

authorized, 380,000 shares issued and outstanding

Requirements

2. Record the journal entries for 2018, assuming that Northern Communications declared the dividend on December 1 for stockholders of record on December 10. Northern Communications paid the dividend on December 20.

Computing price/earnings ratio Refer to the HEB data in Short Exercise S13-17. Assume the market price of HEB’s common stock is $19.50 per share. Compute HEB’s price/earnings ratio.
See all solutions

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