Question

For the year ended December 31, 2019, a company reported earnings per share of $1.95 and cash dividends per share of $0.30. During 2020, the company had a 3-for-2 stock split. In the annual report for the year ended December 31, 2020, earnings per share and cash dividends for 2019 would be reported, respectively, as ___________.

Multiple Choice:
a. $1.30 and $0.20
b. $1.95 and $0.30
c. $2.91 and $0.45
d. $0.65 and $0.10

Answer 1

a. $1.30 and $0.20

Step-by-step explanation:

Stock Split the number of outstanding shares in the revised ratio. Nothing will be changed but the par value and numbers of outstanding shares as a result of stock split.

Total Earning will remain constant

So, Earning Per share will be as follow

It means earnings of 2 share will be distributed to 3

EPS = $1.95 x 2 / 3 = $1.30 per share

Dividend will remain constant

It means earnings of 2 share will be distributed to 3

So, dividend per share will be as follow

Dividend per share = $0.30 x 2 / 3 = $0.20 per share