Question

Frantic Fast Foods had earnings after taxes of $970,000 in 20X1 with 378,000 shares outstanding. On January 1, 20X2, the firm issued 34,000 new shares. Because of the proceeds from these new shares and other operating improvements, earnings after taxes increased by 23 percent.

a. Compute earnings per share for the year 20X1. (Round your answer to 2 decimal places.)
b. Compute earnings per share for the year 20X2.

Answer 1

Answer and Explanation:

The computation of the earning per share is shown below:

As we know that '

Earning per share is

= Earning after taxes ÷ Shares outstanding

1. The earning per share is

= $970,000 ÷ 378,000 shares

= $2.57 per share

2. In case of increase in share and the change in earnings after tax, the earning per share is

= ($970,000 × 1.23) ÷ (378,000 + 34,000)

= $2.90 per share