Question

For the year ended December 31, 2018, Finco Inc. reported earnings per share of $5.70. Answer the following questions: Required: During 2019, the company had a 4-for-1 stock split. Calculate the 2018 earnings per share that will be reported in Finco's 2019 annual report for comparative purposes. During 2020, Finco had an additional 3-for-1 stock split. Calculate the 2018 earnings per share that will be reported in Finco's 2020 annual report for comparative purposes. Assume that Finco had issued a 14% stock dividend in 2019 and did not have a stock split. Calculate the 2018 earnings per share that will be reported in Finco's 2019 annual report for comparative purposes.

Answer 1

Earnings per share of $1.43

Earnings per share of $0.475

With stock dividend,earnings per share is $5.00

Step-by-step explanation:

The 2018 earnings per share that will be reported in 2019 annual report is given by the original earnings per share divided by the of stock split

new earnings per share=$5.7/4

=$ 1.43

The earnings per share would be reported in 2019 assuming Finco Inc had additional stock of 3 for 1 is shown below:

new earnings per share=$5.7/(4*3)

=$0.475

Assuming there was no stock split but instead a 14% stock dividend, the new earnings per share is shown thus:

New earnings per share=$5.7/(1+14%)

=$5.00