Question

Frantic Fast Foods had earnings after taxes of $430,000 in 20X1 with 345,000 shares outstanding. On January 1, 20X2, the firm issued 34,000 new shares. Because of the proceeds from these new shares and other operating improvements, earnings after taxes increased by 23 percent.
Required:
a. Compute earnings per share for the year 20X1. (Round your answer to 2 decimal places.)
b. Compute earnings per share for the year 20X2. (Round your answer to 2 decimal places.)

Answer 1

Answer:earnings per share for the year 20X1= $1.25 per share

earnings per share for the year 20X2 = 1.40

Explanation:

Earning per share is calculated as  = Earning after taxes ÷ Shares outstanding

Therefore, earnings per share for the year 20X1.

= $430,000 ÷345,000 shares

= $1.25 per share

2. In the next year,there was a change in earnings after tax by 23 percent and an increase in shares by  34,000,

Therefore, we have earnings per share for the year 20X2 as  

= ($430,000 × 1.23) ÷ ( 345,000 + 34,000)

=528,900/379000

=1.3955 rounded to 1.40