Question

On December 31, 2020, Ainsworth, Inc., had 560 million shares of common stock outstanding. Fifteen million shares of 7%, $100 par value cumulative, nonconvertible preferred stock were sold on January 2, 2021. On April 30, 2021, Ainsworth purchased 30 million shares of its common stock as treasury stock. Twelve million treasury shares were sold on August 31. Ainsworth issued a 5% common stock dividend on June 12, 2021. No cash dividends were declared in 2021. For the year ended December 31, 2021, Ainsworth reported a net loss of $120 million, including an after-tax loss from discontinued operations of $360 million. Required: 1. Compute Ainsworth's net loss per share for the year ended December 31, 2021. 2. Compute the per share amount of income or loss from continuing operations for the year ended December 31, 2021. 3. Prepare an EPS presentation that would be appropriate to appear on Ainsworth's 2021 and 2020 comparative income statements. Assume EPS was reported in 2020 as $0.75, based on net income (no discontinued operations) of $420 million and a weighted-average number of common shares of 560 million.

Answer 1

Ainsworth, Inc.

1. Net loss per share for the year ended December 31, 2021:

= $0.211

2. Per share amount of income from continuing operations

= $0.422

3. Comparative Income Statements:

2021 2020

Net income (continuing operations) $240 million $420 million

Net income (including

discontinued operations) ($120 million) $0

Weighted-average common stock shares 558 million 560 million

EPS (continuing operations) $0.43 $0.75

EPS (including discontinued operations) ($0.21) $0

Step-by-step explanation:

a) Data and Calculations:

December 31, 2020:

Outstanding common stock = 560 million shares

Outstanding 7%, Cumulative non-convertible preferred stock = 15 million shares at $100 par value

April 30, 2021:

Treasury stock purchased = 30 million

June 12, 2021:

5% Common Stock dividend = 26.5 million shares(530 million * 5%)

August 31, 2021:

Treasury stock sold = 12 million

December 31, 2021: Outstanding common stock = 568.5 million

Therefore, net income from continuing operations = $240 million

After-tax loss from discontinued operations = $360 million

December 31, 2021 reported net loss = ($120 million)

1. Net loss per share for the year ended December 31, 2021:

= $120 million/568.5 million = $0.211

2. Per share amount of income from continuing operations = $240 million/568.5 million = $0.422

3. Comparative Income Statements:

2021 2020

Net income (continuing operations) $240 million $420 million

Net income (including

discontinuing operations) ($120 million) $0

Weighted-average common stock shares 558 million 560 million

EPS (continuing operations) $0.43 $0.75

EPS (including discontinued operations) ($0.21) $0

Weighted-average of Common Stock shares:

January 1, 2021: Outstanding 560 million * 12/12 = 560 million

April 30, 2021: Treasury stock 30 million * 8/12 = -20 million

June 12, 2021: Stock dividend 26.5 million *6.5/12 14 million

August 31, 2021: Treasury stock sold 12 million *4/12 4 million

December 31, 2021: Weighted-average outstanding = 558 million