Question

he Alford Group had 220,000 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 24,000 shares of treasury stock. Oct. 31 Sold the treasury shares purchased on February 28. Nov. 30 Issued 96,000 new shares. Dec. 31 Net income for 2018 is $1,590,000. 2019 Jan. 15 Declared and issued a 2-for-1 stock split. Dec. 31 Net income for 2019 is $1,590,000.

Answer 1

Answer:

Consider the following calculation

Explanation:

1. Determine the 2018 EPS.

EPS = Net Income / Weighted Average number of shares

Numerator

Net Income = $15,90

Denominator

Weighted Average number of shares = 2,20 – (24x10/12) + (24x2/12) + (96x1/12)

= 2,52 Shares

EPS 2018 = $15,90 / 2,52 Shares

= $6.31 per share

2. Determine the 2019 EPS.

Numerator

Net Income = $15,90

Denominator

Weighted Average number of shares

=[ 2,20 – 24 + 24 + 96 ] x 2 Stock Split

= 6,32 Shares

EPS 2019 = $15,90 / 6,32 Shares

= $2.52 per share

3. At what amount will the 2018 EPS be presented in the 2019 comparative financial statements?

Numerator

Net Income = $15,90

Denominator

Weighted Average number of shares

= 2,520 x 2 Stock split

= 5,04 Shares

EPS = $15,90 / 5,04

= $3.15 per share