Question

Effects of stock split and stock dividend on EPS LO 10-9 For the year ended Docember 31,2021 , Finco lncorporated reported earnings per share of $312 Answer the following questions: Required: a. During 2022, the company hod a 3-for-1 stock split. Calculate the 2021 earnings per share that wil be reported in Fincos 2022 annual report for comparative purposes b. During 2023. Finco had an additional 2.foc-1 stock split Calculate the 2021 eamings per thare that will be reported in Fincos 2023 annuat report for comparative purpeses c. Assume that Finco had issued a 105 stock dividend in 2022 and did not have a stock split. Calculate the 2021 earnings per shace that wa be reported in Fincos 2022 annual report for comparative purposes. Note: For all requirements, round your answers to 2 decimal places.

Answer 1

In a 3-for-1 stock split, the 2021 EPS reported in Finco's 2022 annual report would be $104. In a 2-for-1 stock split, the 2021 EPS reported in Finco's 2023 annual report would be $156. If Finco had a 105% stock dividend in 2022 without a stock split, the 2021 EPS reported in Finco's 2022 annual report would still be $312.

Step-by-step explanation:

In a 3-for-1 stock split, the number of shares is multiplied by 3 and the earnings per share (EPS) is divided by 3. Therefore, to calculate the 2021 EPS reported in Finco's 2022 annual report, we can divide the 2021 EPS ($312) by 3, which gives us an EPS of $104.

In a 2-for-1 stock split, the number of shares is multiplied by 2 and the EPS is divided by 2. Using the same logic, the 2021 EPS reported in Finco's 2023 annual report would be $156 ($312 divided by 2).

If Finco had issued a 105% stock dividend in 2022 without a stock split, the number of shares would increase by 105% and the EPS would remain the same. Therefore, the 2021 EPS reported in Finco's 2022 annual report would still be $312.