Comparative Statements of Shareholders’ Equity for Locke Intertechnology Corpora

Question

Comparative Statements of Shareholders’ Equity for Locke Intertechnology Corporation were reported as follows for the fiscal years ending December 31, 2014, 2015, and 2016.

Infer from the statements the events and transactions that affected Locke Intertechnology Corporation's shareholders' equity and compute earnings per share as it would have appeared on the income statements for the years ended December 31, 2014, 2015, and 2016. No potential common shares were outstanding during any of the periods shown. (Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).)

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LOCKE INTERTECHNOLOGY CORPORATION Statements of Shareholders' Equity For the Years Ended Dec. 31, 2014, 2015, and 2016 ($ in millions) Preferred
Stock,
$10 par Common
Stock,
$1 par Additional
Paid-in
Capital Retained
Earnings Total
Shareholders'
Equity   Balance at January 1, 2014 $ 40 $ 550 $ 1,900 $ 2,490      Sale of preferred shares 9 520 529      Sale of common shares, 7/1 8 85 93      Cash dividend, preferred (4 ) (4 )      Cash dividend, common (13 ) (13 )      Net income 350 350   Balance at December 31, 2014 9 48 1,155 2,233 3,445      Retirement of common shares, 4/1 (4 ) (40 ) (25 ) (69 )      Cash dividend, preferred (4 ) (4 )      Cash dividend, common (17 ) (17 )      3-for-2 split effected in the form of
       a common stock dividend, 8/12 22.0 (22.0 )      Net income 450 450   Balance at December 31, 2015 9 66.0 1,093 2,637 3,805      10% common stock dividend, 5/1 6.60 90 (96.60 )      Sale of common shares, 9/1 3 31 34      Cash dividend, preferred (4 ) (4 )      Cash dividend, common (33 ) (33 )      Net income 434 434   Balance at December 31, 2016 9 $ 75.60 $ 1,214.0 $ 2,937.40 $ 4,236

Explanation / Answer

EPS for Year 2014 = Net income - Preferred Dividends/Weighted average Outstanding Shares) EPS for Year 2014 = $350 - $4/44 $7.86 Per Share Weighted Av. Outstanding Shares = 40 shares at Jan. 1 + 8 (New shares) x 6/12 months) 44.00 Shares EPS for Year 2015 = Net income - Preferred Dividends/Weighted average Outstanding Shares) EPS for Year 2015 = $450 - $4/(48 x 3/2 + - 4 x 9/12 x 3/2) $6.61 Per Share Weighted Average outstanding Shares Shares at Jan. 1 2015 48 x 3/2 (stock split adjustment) + - 4 (retired shares) x 3/2 (Stock Split) x 9/12 months) 67.50 Shares EPS for Year 2016 = Net income - Preferred Dividends/Weighted average Outstanding Shares) EPS for Year 2016 = $434 - $4/(66 x 1.10 + 3 x 4/12) $5.84 Per Share Shares at Jan. 1 2016 66 x 1.10 (stock split adjustment) + 3 (new shares) x 4/12 months) 73.6 Shares

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