Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 51

Calculate EPS and effect of stock split on EPS During the year ended December 31, 2011, Gluco, Inc., split its stock on a 3-for-1 basis. In its annual report for 2010, the firm reported net income of $3,703,920 for 2010, with an average 268,400 shares of common stock outstanding for that year. There was no preferred stock.

Required:

a.What amount of net income for 2010 will be reported in Gluco’s 2011 annual report?

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b. Calculate Gluco’s earnings per share for 2010 that would have been reported in the 2010 annual report.

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c. Calculate Gluco’s earnings per share for 2010 that will be reported in the 2011 annual report for comparative purposes.

Step 1 of 5

Calculate EPS and effect on EPS due to stock split:

Stock split:

It is a corporate act in which existing shares of an organization’s are divided into several shares.

Earnings per share:

It refers to the portion of a firm's profit allocated to each share of outstanding common stock. Basically it serves as a display of a firm's profitability.