Question

Calculate EPS and dividends per share before stock split LO 10-9 For several years Orbon incorporated has followed a policy of paying a cash dividend of $0.38 per share and having a 4% stock dividend. In the 2023 annual report, Orbon reported restated earnings per share for 2021 of $1.08. Required: a. Calculate the originally reported earnings per share for 2021. b. Calculate the restated cash dividend per share for 2021 reported in the 2023 annual report for comparative purposes. Note: For all requirements, do not round intermediate calculations. Round your answer to 2 decimal places.

Answer 1

The original EPS before the stock dividend for Orbon Incorporated was $1.04, which is calculated by dividing the restated EPS of $1.08 by 1.04. The restated cash dividend per share remains at the original amount of $0.38, as cash dividends are not affected by stock dividends.

Step-by-step explanation:

When calculating the original earnings per share (EPS) before a stock split, and restating dividends after a stock split for Orbon Incorporated, we need to apply some basic financial analysis principles.

Original EPS Calculation

The calculated EPS after stock dividends is $1.08. To find the original EPS before the stock dividend, we adjust the EPS by the percentage stock dividend increase. Since the company issued a 4% stock dividend, this means there were effectively 4% more shares after the dividend:

Original EPS = Restated EPS / (1 + stock dividend percentage)

Original EPS = $1.08 / (1 + 0.04)

Original EPS = $1.08 / 1.04

Original EPS = $1.0385 (rounded to two decimal places, this would be $1.04)

Restated Dividend Per Share Calculation

For the cash dividend, we do not need to adjust for stock dividends as they do not change the total cash paid, just the number of shares. Therefore, the restated cash dividend per share for 2021 reported in the 2023 annual report for comparative purposes remains at:

Restated Dividend Per Share = Originally stated dividend

Restated Dividend Per Share = $0.38