The Alford Group had 220,000 shares of common stock outstanding at January 1, 20

Question

The Alford Group had 220,000 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 24,000 shares of treasury stock. Oct. 31 Sold the treasury shares purchased on February 28 Nov. 30 Issued 96,000 new shares Dec. 31 Net income for 2016 is $1,590,000 2017 Jan. 15 Declared and issued a 2-for-1 stock split Dec. 31 Net income for 2017 is $1,590,000 Required 1. Determine the 2016 EPS. (Enter your answers in thousands.) Numerator / Denominator | Earnings per Share 2. Determine the 2017 EPS. (Enter your answers in thousands.) Numerator / Denominator = Earnings per Share 3. At what amount will the 2016 EPS be presented in the 2017 comparative financial statements? (Enter your answers in thousands.) Numerator / Denominator | Earnings per Share

Explanation / Answer

2016

Earnings per share = Net income - preferred dividend / Weighted average of shares

Weighted average of shares:

220000 shares * (12/12) 220000

24000 shares * (10/12) (20000)

24000 shares * (2/12) 4000

96000 shares * (1/12) 8000

212000

Earnings per share = $1590000 / 212000 shares

= $7.5 per share

2017

Weighted average shares

= 220000 - (24000) + 24000 + 96000

= 316000 shares

= 316000 shares * 2

= 632000 shares

Earnings per share = $1590000 / 632000 shares

= $2.5 per share.

Earnings per share = $1590000 / 424000 shares

= $3.75 per share.

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