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

Exercise 45

Effects of stock split and stock dividend on EPS Required:

a.For the year ended December 31, 2009, Finco, Inc., reported earnings per share of $3.12. During 2010 the company had a 3-for-1 stock split. Calculate the 2009 earnings per share that will be reported in Finco’s 2010 annual report for com­parative purposes.

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b. During 2011 Finco had a 2-for-1 stock split. Calculate the 2009 earnings per share that will be reported in Finco’s 2011 annual report for comparative purposes.

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c. If Finco had issued a 10% stock dividend in 2010 and did not have a stock split, calculate the 2009 earnings per share that will be reported in Finco’s 2010 annual report for comparative purposes. Round your answer to two decimal places.

Step 1 of 4

Effects of stock dividend and stock split on Earning per share:

Stock dividend:

It is a mode of dividend disbursement made in the terms of additional shares, instead of a cash payout.

Stock split:

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

Earnings per share:

Earnings per share is a portion in profit of an organizations distributed to each outstanding common stock. Profit will be distributed after payment of dividend to the preferred stockholders.

Earnings per share will be calculated by the following formula.

By extracting the information: