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Chapter 13: Q23RQ (page 707)

What does earnings per share report, and how is it calculated?

Short Answer

Expert verified

Earnings per share represent the profit earned by the company on per outstanding share basis calculated on quarterly or yearly intervals.

Earnings per share = (Net income - preferred dividends) / weighted average of common shares outstanding

Step by step solution

01

Introduction to topic

Earnings Per Shares is a financial ratio, which divides net earnings available to common stockholders by the weighted average outstanding shares over a specific period of time.

02

Step 2:Reporting and calculation of earning per share

Earnings per share represents the amount of net income or loss for each share of the corporation's outstanding common stock. It is calculated by considering net income reduce preferred dividends divide the value by the weighted average number of common shares outstanding.

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Most popular questions from this chapter

Rocky Corporation鈥檚 accounting records include the following items, listed in no particular order, at December 31, 2018:

Other Income and (Expenses) \( (6,000) Cost of Goods Sold \) 29,200

Net Sales Revenue 70,800 Operating Expenses 22,000

Gain on Discontinued Operations 4,800

The income tax rate for Rocky Corporation is 30%. Prepare Rocky鈥檚 income statement for the year ended December 31, 2018.

Omit earnings per share. Use a multi-step format

Question: 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

3. Assume the preferred stock is noncumulative and Copperhead passed the preferred dividend in 2016 and 2017. In 2018, the company declares cash dividends of $46,000. How much of the dividend goes to preferred stockholders? How much goes to common stockholders?

Question: Journalizing issuance of stock鈥攁t par and at a premium

Colorado Corporation has two classes of stock: common, \(3 par value; and preferred, \)30 par value.

Requirements

1. Journalize Colorado鈥檚 issuance of 4,500 shares of common stock for $6 per share.

Identifying advantages and disadvantages of a corporation

Following is a list of advantages and disadvantages of the corporate form of business. Identify each quality as either an advantage or a disadvantage.

a. Ownership and management are separated.

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?
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