Question

At December 31, 2016, the balance sheet of Goode Corporation included 80 million common shares. On October 1, 2017, Goode retired 4 million shares as part of a share repurchase program. Net income for the year ended December 31, 2017, was $400 million. Goode's 2017 EPS should be:

Answer 1

The earnings per share (EPS) for Goode Corporation for 2017 is calculated using the weighted average shares after retiring 4 million shares, resulting in an EPS of approximately $5.06.

Step-by-step explanation:

The earnings per share (EPS) for Goode Corporation for the year ended December 31, 2017, would be calculated by taking the net income for the year ($400 million) and dividing it by the weighted average number of shares outstanding during the year. Since Goode Corporation retired 4 million shares on October 1, those shares would not be counted for the full year. Instead, a weighted average considering that the company had 80 million shares for nine months and 76 million shares for three months (after the repurchase) would be used to calculate the EPS.

To calculate the weighted average number of shares:

80 million shares × 9/12 months = 60 million shares

76 million shares × 3/12 months = 19 million shares

Total weighted average shares = 60 million + 19 million = 79 million shares

The EPS would then be $400 million divided by 79 million shares, which equals approximately $5.06 per share.