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Chapter 13: Q16SE (page 711)

Computing earnings per share

HEB Corporation had net income for 2018 of \(60,450. HEB had 15,500 shares of common stock outstanding at the beginning of the year and 20,100 shares of common stock outstanding as of December 31, 2018. During the year, HEB declared and paid preferred dividends of \)2,600. Compute HEB鈥檚 earnings per share.

Short Answer

Expert verified

Earnings per share of the company is $3.25

Step by step solution

01

Computation

Averageoutstandingcommonstock=Beginningcommonstock-Endingcommonstock2=15,500+20,1002=17,800shares

02

 Step 2: Calculation of earnings per share

Earnings Per Share

Net Income

$60,450

Less: Preference dividend

($2,600)

a

$57,850

b. Average outstanding common stock

17,800

Earnings per share (a/b)

$3.25

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Most popular questions from this chapter

Computing dividends on preferred and common stock and journalizing

The following elements of stockholders鈥� equity are from the balance sheet of Sneed Marketing Corp. at December 31, 2017:

800,000

Preferred Stock鈥�4%, \(2 Par Value; 80,000 shares

authorized, 55,000 shares issued and outstanding

Paid-In Capital:

\) 110,000

Stockholders鈥� Equity

Common Stock鈥擻(0.10 Par Value; 8,750,000 shares

authorized, 8,000,000 shares issued and outstanding

Sneed paid no preferred dividends in 2017.

Requirements

1. Compute the dividends to the preferred and common shareholders for 2018 if total dividends are \)185,000 and assuming the preferred stock is noncumulative. Assume no changes in preferred and common stock in 2018.

What does the statement of retained earnings report?

Question: Dividing cash dividends between preferred and common stock

Copperhead Trust has the following classes of stock:

Preferred Stock鈥�6%, \(12 par value; 8,500 shares authorized, 7,000 shares issued and outstanding

Common Stock鈥擻)0.10 par value; 2,100,000 shares authorized, 1,400,000 shares issued and outstanding

Requirements

1. Copperhead declares cash dividends of $44,000 for 2018. How much of the dividends goes to preferred stockholders? How much goes to common stockholders?

Question: Accounting for the purchase and sale of treasury stock

Discount Furniture, Inc. completed the following treasury stock transactions in 2018:

Dec. 1 Purchased 1,900 shares of the company鈥檚 \(1 par value common stock as treasury stock, paying cash of \)5 per share.

15 Sold 200 shares of the treasury stock for cash of \(8 per share.

20 Sold 1,000 shares of the treasury stock for cash of \)1 per share. (Assume the balance in Paid-In Capital from Treasury Stock Transactions on December 20 is $2,400.)

Requirements

2. How will Discount Furniture, Inc. report treasury stock on its balance sheet as of December 31, 2018?

Journalizing issuance of stock and preparing the stockholders鈥� equity section of the balance sheet

The charter for ASAP-TV, Inc. authorizes the company to issue 100,000 shares of \(5, no-par preferred stock and 500,000 shares of common stock with \)1 par value. During its start-up phase, ASAP-TV completed the following transactions:

Sep. 6 Issued 550 shares of common stock to the promoters who organized the corporation, receiving cash of \(16,500.

12 Issued 400 shares of preferred stock for cash of \)23,000.

14 Issued 1,500 shares of common stock in exchange for land with a market value of $17,000.

Requirements

1. Record the transactions in the general journal.
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