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EPS Pacific Gas and Electric Company is a large gas and electric utility operating in northern and centrai California. Three recent years of financial data for Pacific Gas and Electric Company are as follows: Fiscal Years Ended (in millions) Year 3 Year 2 Year 1 Net income $888 $1,450 $828 Preferred dividends $14 $14 $14 Average number of common shares outstanding 484 468 444 a. Determine the earnings per share for fiscal Year 3, Year 2, and Year 1. Round to the nearest cent. b. Evaluate the growth in earnings per share for the three years in comparison to the growth in net income for the three years.

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 13, Problem 13.24EX
Textbook Problem

EPS

Pacific Gas and Electric Company is a large gas and electric utility operating in northern and centrai California. Three recent years of financial data for Pacific Gas and Electric Company are as follows:

    Fiscal Years Ended (in millions)  
  Year 3 Year 2 Year 1
Net income $888 $1,450 $828
Preferred dividends $14 $14 $14
Average number of common shares outstanding 484 468 444
  1. a. Determine the earnings per share for fiscal Year 3, Year 2, and Year 1. Round to the nearest cent.
  2. b. Evaluate the growth in earnings per share for the three years in comparison to the growth in net income for the three years.

Expert Solution

(a)

To determine

Earnings per share:

Earnings per share represent the amount of income earned per share of outstanding common stock in a period. This ratio is used for analyzing the profitability of company’s stockholders’.

The following formula can be used to calculate earnings per share:

Earnings per shareNet income(loss) – Preferred dividendsAverage number of common shares outstanding

To determine: The earnings per share of Company P for Year 3, Year 2, and Year 1.

Explanation of Solution

Determine the earnings per share of Company P for Year 3, Year 2, and Year 1.

Earnings per share for Year 3Net income – Preferred dividendsAverage number of common shares outstanding=$888 –$14484 shares$1.81per share

Earnings per share for Year 2Net income – Preferred dividendsAverage number of common shares outstanding

Expert Solution

(b)

To determine

To evaluate: The growth in earnings per share for 3 years in comparison to the growth in net income for the 3 years.

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Chapter 13 Solutions

Accounting
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