8 The Alford Group had 200000 shares of common stock outstan

8 The Alford Group had 200,000 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. 10 points 2018 Feb. 28 Purchased 18,000 shares of treasury stock Oct. 31 Sold the treasury shares purchased on February 28 Nov. 30 Issued 72,000 new shares Dec. 31 Net income for 2018 is $1,649,000 2019 Jan. 15 Declared and issued a 2-for-1 stock split. Dec. 31 Net income for 2019 is $1,649,000 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?

Solution

Earning per share = Earnings avaialble for Shareholders / Average Number of share outstanding

2018

Net income = 1,649,000

Earning per share = Earnings avaialble for Shareholders / Average Number of share outstanding

Earnings per share =  1,649,000 / 194000 = 8.5 per share

2019

Net Income = 1649000

Weighted average of shares

1/1 – 12/31 = 200,000–18,000+18,000+72,000 = 272,000 x 2 = 544,000

Earning per share = Earnings avaialble for Shareholders / Average Number of share outstanding

= 1649000 / 544000

= 3.03

2018 EPS in the 2019 comparative financial statements

Weighted Average of shares outstanding from 2018 = 194000

Retroactive application of stock split = 2

Weighted Average of shares for 2018 = 388000

For comparative purposes:

2018 EPS = $1,649,000 / 388,000 = $1.00

2019 EPS = $1,649,000 / 544,000 = $3.03

Jan..18	Shares at Jan. 1, 2018	200000
Feb.. 28	Treasury shares	-15000
Óct 31	Treasury shares sold	3000
Nov 31	New shares	6000
		194000