Question

Calculate EPS and effect of stock split on EPS LO 10.9 During the year ended December 31, 2023. Gluco incorporated split its stock on a 4.for-1 bosis, In its annual report for 2022, the firm reported net income of $918,400 for 2022, with an average 225,700 shares of common stock outstanding for that year. There was no preferred stock. Required: a. What amount of net income for 2022 will be reported in Glucos 2023 annual report? b. Calculate Gluco's eamings per share for 2022 that would have been reported in the 2022 annual report. Note: Round your answer to 2 decimal places. c. Caiculate Glucos earnings per share for 2022 that will be feported in the 2023 annual report for comparative puposes Note: Round your answer to 2 decimal places.

Answer 1

To calculate the net income for 2022 that will be reported in Gluco's 2023 annual report, we need to consider the effect of the stock split. The net income for 2022 reported in Gluco's 2023 annual report would be $3,671,600. The EPS for 2022 reported in the 2023 annual report would be $1.02 per share.

Step-by-step explanation:

To calculate the net income for 2022 that will be reported in Gluco's 2023 annual report, we need to consider the effect of the stock split. Since Gluco incorporated split its stock on a 4-for-1 basis, the number of shares will increase by a factor of 4. Therefore, the number of shares outstanding for 2022 will be 225,700 x 4 = 902,800 shares.

To calculate the net income for 2022 reported in Gluco's 2023 annual report, we can use the formula: Net Income for 2022 (before stock split) x (Shares After Split / Shares Before Split). Plugging in the values, the net income for 2022 reported in Gluco's 2023 annual report would be: $918,400 x (902,800 / 225,700) = $3,671,600.

Now, to calculate Gluco's earnings per share (EPS) for 2022 that would have been reported in the 2022 annual report, we can use the formula: Net Income / Average Number of Shares. Plugging in the values, the EPS for 2022 would be: $918,400 / 225,700 = $4.07 per share.

Finally, to calculate Gluco's earnings per share (EPS) for 2022 that will be reported in the 2023 annual report, we need to consider the effect of the stock split. Since the number of shares will increase by a factor of 4, the EPS will decrease by the same factor. Therefore, the EPS for 2022 reported in the 2023 annual report would be: $4.07 / 4 = $1.02 per share.