Question

g Earnings per share Financial statement data for the years 20Y5 and 20Y6 for Black Bull Inc. follow: 20Y5 20Y6 Net income $1,687,000 $2,632,000 Preferred dividends $40,000 $40,000 Average number of common shares outstanding 90,000 shares 120,000 shares a. Determine the earnings per share for 20Y5 and 20Y6. Round to two decimal places. 20Y5 20Y6 Earnings per Share $fill in the blank 1 $fill in the blank 2 b. Is the change in the earnings per share from 20Y5 to 20Y6 favorable or unfavorable

Answer 1

a) EPS

2005 Earnings per share=$18.3

2005 Earnings per share=$21.6

b) EPS Variance = $3.3 favorable

Step-by-step explanation:

Earnings per share(EPS) is the total earnings attributable to ordinary shareholders divided by the number of units of common stock

Earnings attributable to ordinary shareholders= Net income after tax - preference dividend

Earnings per share = (Net income after tax - preference dividend)/Number of shares

2005 Earnings per share = $1,687,000- $40,000/90,000 shares=$18.3

2006 Earnings per share=($2,632,000- $40,000)/120,000 shares=$21.6

2005 Earnings per share=$18.3

2006 Earnings per share=$21.6

EPS Variance

Comparing the EPS the Earning per share in 2006 is higher than that of 2005. Hence, the variance = 21.6-18.3= $3.3 favorable

EPS Variance = $3.3 favorable