The Alford Group had 280,000 shares of common stock outstanding at January 1, 20

Question

The Alford Group had 280,000 shares of common stock outstanding at January 1, 2016. The following activities affected common shares during the year. There are no potential common shares outstanding. 2016 Feb. 28 Purchased 12,000 shares of treasury stock. Oct. 31 Sold the treasury shares purchased on February 28. Nov. 30 Issued 48,000 new shares. Dec. 31 Net income for 2016 is $1,242,000. 2017 Jan. 15 Declared and issued a 2-for-1 stock split. Dec. 31 Net income for 2017 is $1,242,000. Required: 1. Determine the 2016 EPS 2. Determine the 2017 EPS 3. At what amount will the 2016 EPS be presented in the 2017 comparative financial statements?

Explanation / Answer

1. Determine the 2016 EPS

EPS = Net Income / Weighted Average Outstanding Common Shares

........= $1,242,000 / 276,000

........= $4.5

2. Determine the 2017 EPS

EPS = Net Income / Weighted Average Outstanding Common Shares

.........= $1,242,000 / 656,000

.........= $1.89

3. At what amount will the 2016 EPS be presented in the 2017 comparative financial statements?

EPS = Net Income / Weighted Average Outstanding Common Shares

........= $1,242,000 / (276,000 + 328,000)

........= $2.06

Calculation of weighted average outstanding common shares for 2016 Date Particulars No. 1-Jan No. of shares at the beginning (280,000 x 12/12) 280,000 28-Feb Treasury stock purchased (12,000 x 10/12) -10,000 31-Oct Sold treasury stock (12,000 x 2/12) 2,000 30-Nov Issued new shares (48,000 x 1/12) 4,000 Total Weighted average outstanding common shares 276,000

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