Financial Reporting Question
Category: Business and Money > Accounting
Asked by: aproc84114-ga
List Price: $10.00
01 Apr 2005 14:14 PST
Expires: 01 May 2005 15:14 PDT
Question ID: 503793
A corp had net income reported for 2004 of $880,000. During 2004 dividends of $120,000 were declared on preferred stock and $200,000 were declared on common stock. There were no changes in the 200,000 shares of common stock or the 40,000 shares of preferred stock outstanding in 2004. Calculated the Earnings per share..
Re: Financial Reporting Question
Answered By: richard-ga on 01 Apr 2005 14:40 PST
Hello and thank you for your question. Earnings per share are actually "earnings per common share." Preferred stock dividends reduce earnings per [common] share, but common stock dividends don't. So the earnings per share is (880,000 - 120,000)/200,000 = $3.80 Simplifying EPS http://www.aicpa.org/pubs/jofa/aug97/simpli.htm Summary of Statement No. 128 Earnings per Share (Issued 2/97) http://www.fasb.org/st/summary/stsum128.shtml "Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period" A current controversy is in what circumstances securities convertible into common shares need to be included in the denominator, but your question does not raise that issue. http://www.fasb.org/draft/ed_eps_amend_st128.pdf Search terms used: "Earnings Per Share" FASB FASB Statement 128 Thanks again for letting us help. Google Answers Researcher Richard-ga
rated this answer:
THANKS VERY MUCH
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