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Chapter 16: Q17E (page 878)

(L04) (EPS: Simple Capital Structure) Ace Company had 200,000 shares of common stock outstanding on December 31, 2018. During the year 2019, the company issued 8,000 shares on May 1 and retired 14,000 shares on October 31. For the year 2019, Ace Company reported net income of \(249,690 after a loss from discontinued operations of \)40,600 (net of tax).

Instructions

What earnings per share data should be reported at the bottom of its income statement?

Short Answer

Expert verified

Earnings per share equals $1.23 per share.

Step by step solution

01

Computation of Weighted average number of shares outstanding

EVENT

DATE

OUTSTANDING AMOUNT

FRACTION OF YEAR

WEIGHTED SHARES

Beginning balance

Jan 1- May 1

200,000

4 /12

66,667

Issued Shares

May 1- Oct 31

208,000

(200,000 + 8,000)

6 /12

104,000

Required Shares

Oct 1- Dec 31

194,000

(208,000 – 14,000)

2 /12

32,333

203,000

02

Computation of earnings per share

Income per share from continuing operations

$290,290 (($249,690+$40,600)/ 203,000)

$1.43

Less: Loss from discontinued operations

($40,600/ 203000)

-$0.2

Net Income per share (249690/ 203000)

$1.23

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Most popular questions from this chapter

What is meant by the term antidilution? Give an example.

E16-30 (L06) (Stock-Appreciation Rights) Capulet Company establishes a stock-appreciation rights program that entitles its new president Ben Davis to receive cash for the difference between the market price of the stock and a pre-established price of \(30 (also market price) on December 31, 2013, on 30,000 SARs. The date of grant is December 31, 2013, and the required employment (service) period is 4 years. President Davis exercises all of the SARs in 2019. The fair value of the SARs is estimated to be \)6 per SAR on December 31, 2014; \(9 on December 31, 2015; \)15 on December 31, 2016; \(6 on December 31, 2017; and \)18 on December 31, 2018.

Instructions

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