Question

The Alford Group had 260,000 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 6,000 shares of treasury stock. Oct. 31 Sold the treasury shares purchased on February 28. Nov. 30 Issued 24,000 new shares. Dec. 31 Net income for 2021 is $1,419,000. 2022 Jan. 15 Declared and issued a 2-for-1 stock split. Dec. 31 Net income for 2022 is $1,419,000. 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

Answer 1

Answer:

1.EPS 2021 = net icome / no of shares =$1,419,000/ 284000 =4.99 = 5

2.EPS 2022 = $1,419,000/ 852000 = 1.67 = 2

3.EPS will be shown as $5

Explanation:

Number of shares= 260000

issued shares = 24000

shares at the end 2021 = 284000    

New issue 284 000*2/1 = 568000

shares at the end 2022 = 852000

Answer 2

Answer:

EPS 2021    $5.5

EPS 2022   $2.4982

We will compare by dividing by 2 as we make a stock split

5.5 / 2 =

EPS 2021 in the 2022 income statement $2.75

Explanation:

We have to calcualte the weighted average shares outstandings

260,000  beginning

-   6,000 x 10/12 (February through December)

+  6,000 x  2/12 (Nov and Dec)

+24,000 x  1/12

258,000  weighted average shares

EPS = net income / outstanding shares

income 1,419,000 / 258,000 = 5.50

2.1 stock split therefore

284,000 shares beginning x 2 = 568,000 shares

EPS 1,419,000 / 568,000 = 2,4982 EPS