Question

Exercise 19-13 EPS: treasury stock; new shares; stock dividends; two years [LO19-5, 19-6] The Alford Group had 270,000 shares of common stock outstanding at January 1, 2018. The following activities affected common shares during the year. There are no potential common shares outstanding 2018 Feb. 28 Purchased 9,600 shares of treasury stock. Oct. 31 Sold the treasury shares purchased on February 28. Nov. 30 Issued 36,080 new shares. Dec. 31 Net income for 2018 is $1,335,000. on February 28, 2019 Jan. 15 Declared and issued a 2-for-1 stock split Dec. 31 Net income for 2019 is $1,335,000. 335,080. Required: 1. Determine the 2018 EPS. 2. Determine the 2019 EPS. 3. At what amount will the 2018 EPS be presented in the 2019 comparative financial statements? (For all requirements, Enter your answers in thousands.) Numerator / Denominator - Earnings per Share

Answer 1

EPS = Net Income for the year/ Weighted Average shares Outstanding

2018

Net Income = $ 1,335,000

Weighted Avg Shares = (270,000 shares * 12/12 months) + (9000 shares * 10/12) - (9000 shares * 2/12)+ (36000 shares * 1/12)

= 279,000 shares

Thus, EPS for the year 2018 is ($1,335,000/ 279,000 shares) = $4.78 per share

2019

Net Income = $ 1,335,000

Number of shares outstanding at the beginning of the year = 306,000 shares

Number of shares after 2-for-1 stock split = 612,000 shares

Thus, EPS for the year 2019 is ($1,335,000/ 612,000 shares) = $2.18 per share

Reinstated EPS

The Reinstated EPS for the year 2018 to be presented in 2019 comparative financial statements will be

= ($1,335,000/ 558,000 shares) = $ 2.39 per share