For several years Orbon, Inc., has followed a policy of paying a cash dividend o
ID: 2448943 • Letter: F
Question
For several years Orbon, Inc., has followed a policy of paying a cash dividend of $0.73 per share and having a 3% stock dividend. In the 2014 annual report, Orbon reported restated earnings per share for 2012 of $0.90.
Required: a. Calculate the originally reported earnings per share for 2012. (Do not round your intermediate calculations and round your final answer to 2 decimal places.)
b. Calculate the restated cash dividend per share for 2012 reported in the 2014 annual report for comparative purposes. (Do not round your intermediate calculations and round your final answer to 2 decimal places.)
Explanation / Answer
To calculate the original value of EPS, we will have to make adjustment for the stock dividend on an yearly basis. The original EPS for 2012 can be determined with the use of following formula:
EPS in 2013 Annual Report = EPS in 2014 Annual Report*(1+Stock Dividend)
Original EPS in 2012 = EPS in 2013 Annual Report*(1+Stock Dividend)
___________
Solution:
Using the values provided in the question, we get,
EPS in 2013 Annual Report = .90*(1+3%) = .93
Original EPS in 2012 Annual Report = .93*(1+3%) = .95 (answer)