Question

Abco Inc has 500 common shares authorized, 350 issued and 100 treasury shares for all of 2020 and 2021. There are no preferred shares or potentially dilutive securities. Abco sold 75 treasury shares on Jan 01, 2022. On October 01, 2023, Abco executed a 2 for 1 stock split. There were no other stock transactions. NOTE: Show supporting calculations or explanations below each table. 1. Based on information above and NI information below, find Basic EPS as reported in financial statements issued for 2022. 2022 $1,500 2021 $800 2020 $900 Net income Wtd Avg Common Shares Outstanding Basic EPS 2. Based on information above and Nl information below, find Basic EPS as reported in financial statements issued for 2023. 2023 2022 2021 Net income $1,800 $1,500 $800 Wtd Avg Common Shares Outstanding Basic EPS

Answer 1

Please find attached computation and explanation based on which EPS for questions 1, 2 & 3 are computed:

2023 350 -100 2501 75 2022 350 -100 250 75 325 2021 350 -100 250 Issued Shares Treasury Stock Outstanding shares (Issued shares minus Treasury stock) Treasury stock sold on Jan 1, 2022 Outstanding shares (Previous o/s shares + Treasury stock sold) 2 for 1 stock Split on Oct 1, 2023 Outstanding (o/s) shares (Previous o/s shares * 2) 2020 350 -100 250 325 650 900 2501 3.60 Net Income 1800 1500 800 Weighted Average common shares outstanding = (325*(9/12))+(650*(3/12) Sum of (number of shares o/s (multiplied by number of months o/s divided by 12 months in the year)) 406.25 325 250 Basic EPS = (Net Income-preferred dividend) / Weighted Average common shares o/s (rounded off to 2 decimal places) 4.43 4.62 3.20 If Preferred Share exists; As it is cumulative preference shares, even if dividend is not declared, the same has to be assumed for computation; As it is non-participating preference shares, the uppercap of dividend is limited to the % fixed in their share certificate; in this case it is 5% of total par value of $ 10,000. The given total dividend of $ 1000 in year 2021 includes both preference shareholders and common share holders. Preferred Dividend ($10000*5%) 500 500 Numerator for BEPS (Net income minus preferred dividend) 1300 1000 300 Basic EPS = (Net Income-preferred dividend) / Weighted Average common shares o/s (rounded off to 2 decimal places) 500 3.08

Please find attached answer table for questions 1 , 2 & 3 as below:

2020 900 Net Income Wtd Avg Common shares o/s Basic EPS 2022 1500 325 4.62 2021 800 250 3.2 250 3.6 2022 Net Income Wtd Avg Common shares o/s Basic EPS 2023 1800 406.25 4.43 1500 325 4.62 2021 800 250 3.2 2021 Numerator for BEPS Wtd Avg Common shares os Basic EPS 2023 1300 406.25 3.21 2022 1000 325 3.08 3001 250 1.2