Q13SE - Horngren'S Financial And Managerial Accounting

Question

Reporting earnings per share

Return to the ABC data in Short Exercise S13-12. ABC had 8,000 shares of common stock outstanding during 2018. ABC declared and paid preferred dividends of $4,000 during 2018.

Show how ABC reports EPS data on its 2018 income statement.

Step-by-Step Solution

Answer

Report shows Income from continuous operation EPS is $0.93, Discontinued operations EPS is $0.27 and Net Income EPS is $1.21.

Step 1: Computation

$\begin{array}{c}\mathbf{IncomefromContinousOperationPerShare}\mathbf{=}\frac{\mathrm{IncomefromContinousOperation}-\mathrm{Dividend}}{\mathrm{NumberofShares}}\\ \mathbf{=}\frac{\$11,468-\$4,000}{8,000}\\ \mathbf{=}\mathbf{\$}\mathbf{0}\mathbf{.}\mathbf{93}\end{array}$

$\begin{array}{c}\mathbf{DiscontinuedOperationPerShare}\mathbf{=}\frac{\mathrm{GainonDiscontinuedOperation}}{\mathrm{NumberofShares}}\\ \mathbf{=}\frac{\$2,196}{8,000}\\ \mathbf{=}\mathbf{\$}\mathbf{0}\mathbf{.}\mathbf{27}\end{array}$

$\begin{array}{c}\mathbf{NetIncomePerShare}\mathbf{=}\frac{\mathrm{NetIncome}-\mathrm{Dividend}}{\mathrm{NumberofShares}}\\ \mathbf{=}\frac{\$13,664-\$4,000}{8,000}\\ \mathbf{=}\mathbf{\$}\mathbf{1}\mathbf{.}\mathbf{21}\end{array}$

Step 2: Reporting EPS-

ABC Corporation Income Statement Dec 31, 2018
Earnings per share of common stock (8,000 outstanding shares)
Income from continuous operation	$0.93
Discontinued operations	$0.27
Net Income	$1.21