Comparative Statements of Shareholders’ Equity for Locke Intertechnology Corpora
ID: 2465862 • Letter: C
Question
Comparative Statements of Shareholders’ Equity for Locke Intertechnology Corporation were reported as follows for the fiscal years ending December 31, 2011, 2012, and 2013.
LOCKE INTERTECHNOLOGY CORPORATION
Statements of Shareholders' Equity
For the Years Ended Dec. 31, 2011, 2012, and 2013
($ in millions)
Preferred
Common
Total
Stock,
Stock,
Additional
Retained
Shareholders'
$10 par
$1 par
Paid-in Capital
Earnings
Equity
Balance at January 1, 2011
65
515
1,886
2,466
Sale of preferred shares
9
450
459
Sale of common shares, 7/1
8
78
86
Cash dividend, preferred
(1
)
(1
)
Cash dividend, common
(15
)
(15
)
Net income
280
280
Balance at December 31, 2011
9
73
1,043
2,150
3,275
Retirement of common shares, 4/1
(6
)
(33
)
(18
)
(57
)
Cash dividend, preferred
(1
)
(1
)
Cash dividend, common
(19
)
(19
)
3-for-2 split effected in the form of
a common stock dividend, 8/12
33.5
(33.5
)
Net income
380
380
Balance at December 31, 2012
9
100.5
976
2,492
3,578
10% common stock dividend, 5/1
10.05
110
(120.05
)
Sale of common shares, 9/1
3
35
38
Cash dividend, preferred
(3
)
(3
)
Cash dividend, common
(26
)
(26
)
Net income
420
420
Balance at December 31, 2013
9
113.55
1,121.5
2,762.95
4,007
Required:
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, 2011, 2012, and 2013. No potential common shares were outstanding during any of the periods shown. (Do not round intermediate calculations and round your final answers to 2 decimal places.)
DIC. 3, 2011 DIC. 31, 2012 DIC. 31, 2013
EARNINGS PER SHARE
question #(2)
On December 31, 2012, Berclair Inc. had 540 million shares of common stock and 21 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2013, Berclair purchased 24 million shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2013. Four million treasury shares were sold on October 1. Net income for the year ended December 31, 2013, was $900 million.
Also outstanding at December 31 were incentive stock options granted to key executives on September 13, 2008. The options are exercisable as of September 13, 2012, for 84 million common shares at an exercise price of $75 per share. During 2013, the market price of the common shares averaged $100 per share.
Compute Berclair’s basic and diluted earnings per share for the year ended December 31, 2013. (Round your answers to 2 decimal places.)
Comparative Statements of Shareholders’ Equity for Locke Intertechnology Corporation were reported as follows for the fiscal years ending December 31, 2011, 2012, and 2013.
Explanation / Answer
Answer:2 Basic EPS=(Net income-Preferred Dividend)/No. of shares outstanding
=(900-(21*100*9%)/547=1.30
No. of shares outstanding=
1 jan -31 dec=540*12/12=540*1.05=567
1 march- 31 dec=24*10/12=(20)*1.05=-21
1 oct-31 dec=4*3/12 =1
Total =547
The Treasury Stock Method assumes that the proceeds received upon exercise of $6300 (84 million x $75) are used to buy back stock at the average market price, i.e., $6300 ÷ $100 = 63
The net increase in the number of shares = 21 million (84 million issued upon exercise – 63 million repurchased)
Diluted EPS=(900-189)/547+21
=1.25
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