For the year ended December 31, 2012, Joey Co. reported Net Income of $655,000.
ID: 2386987 • Letter: F
Question
For the year ended December 31, 2012, Joey Co. reported Net Income of $655,000. At January 1, 2012 the company had 900,000 shares of common stock outstanding. At December 31, 2012, Joey Co had what is described as a “Simple Capital Structure.” The following changes in the number of shares occurred during 2012:April 1: Sold 60,000 shares of common stock.
May 31: Declared and Distributed a 5% Stock Dividend
July 1: Issued 72,000 shares of common stock
1. Compute Joey Co’s earnings per share for the year ended December 31, 2012 .
2. Given the facts as presented above, Joey Co would have to report Diluted EPS at 12/31/2012. TRUE or FALSE [Circle One]
Explanation / Answer
Net income 655,000 Number of Shares for the period Jan - Mar 900,000 Number of Shares for the period Apr - May = 900,000-60,000 840,000 Stock dividend on 31 may = (900,000-60,000)*5% 42,000 Number of Shares for the period June = 840,000+42,000 882,000 Number of Shares for the period July -Dec = 882,000 + 72,000 954,000 Weighted average number of stock = 900,000*3/12 + 840,000*2/12 + 882,000*1/12 + 954,000 *6/12 915,500 Earnings per share = 655,000 / 915,500 0.72 No as there is no such stock which can convert into equity in a future date