Question

The Alford Group had 240,000 shares of common stock outstanding at January 1, 2021. The following activities affected common shares during the year. There are no potential common shares outstanding. 2021 Feb. 28 Purchased 30,000 shares of treasury stock. Oct. 31 Sold the treasury shares purchased on February 28. Nov. 30 Issued 120,000 new shares. Dec. 31 Net income for 2021 is $1,495,000. 2022 Jan. 15 Declared and issued a 2-for-1 stock split. Dec. 31 Net income for 2022 is $1,495,000. Required: 1. Determine the 2021 EPS. (Do not round intermediate calculations.) 2. Determine the 2022 EPS. 3. At what amount will the 2021 EPS be presented in the 2022 comparative financial statements? (For all requirements, Enter your answers in thousands.) Numerator 7 Denominator = Earnings per Share

Answer 1

Earning for share = Net income/ Number of shares outstanding
Requirement 1
Date	Description	Number shares	Cumulative number of Shares	Number of months outstanding	Product
Jan. 1, 2021	Beginning	240000	240000	2	480000
Feb. 28, 2021	Treasury shares purchased	30000	210000	8	1680000
Oct. 31, 2021	Sale of treasury shares	30000	240000	2	480000
Nov. 30, 2021	Issue of new shares	120000	360000	1	360000
					3000000
Weighted average number of shares = 3000000/12 = 250,000 shares
Earning for share = 1,495,000/ 250,000 =5.98 per share
Requirement 2
Number of shares outstanding = 360,000 shares
Number of shares outstanding after stock split = 360,000 shares X 2 = 720,000 Shares
Earning for share = 1,495,000/ 720,000 =2.08 per share
Requirement 3
Number of shares outstanding for comparative financial statement = 250,000 shares X 2 = 500,000 shares
Earning for share = 1,495,000/ 500,000 =2.99 per share