close solutoin list

EPS Caterpillar Inc. and Deere & Company are two large companies that manufacture and sell equipment used in the construction, mining, agricultural, and forestry industries. The companies reported the following data (in millions) for two recent years: Caterpillar Deere Year 2 Year 1 Year 2 Year 1 Net income $2,102 $3,695 $1,940 $3,162 Average number of common shares outstanding 594 599 334 363 a. Determine the earnings per share in Year 2 and Year 1 for each company. Round to the nearest cent. b. Evaluate the relative profitability of the two companies.

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 13.25EX
Textbook Problem

EPS

Caterpillar Inc. and Deere & Company are two large companies that manufacture and sell equipment used in the construction, mining, agricultural, and forestry industries. The companies reported the following data (in millions) for two recent years:

  Caterpillar Deere
  Year 2 Year 1 Year 2 Year 1
Net income $2,102 $3,695 $1,940 $3,162
Average number of common shares outstanding 594 599 334 363
  1. a. Determine the earnings per share in Year 2 and Year 1 for each company. Round to the nearest cent.
  2. b. Evaluate the relative profitability of the two companies.

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 C and Company D for Year 2 and Year 1.

Explanation of Solution

Determine the earnings per share of Company C and Company D for Year 2 and Year 1.

  Earnings per share
Year 2 Year 1
Company C $3.54 per share $6.17 per share
Company D $5.81 per share $8.71 per share

Working note:

Determine the earnings per share of Company C for Year 2 and Year 1.

Earnings per share of Company C for Year 2}Net incomeAverage number of common shares outstanding=$2,102594 shares$3.54per share

Earnings per share of Company C for Year 1}Net incomeAverage number of common shares outstanding=$3,695599 shares$6

Expert Solution

(b)

To determine

To evaluate: The relative profitability of the Company C and Company D.

Want to see this answer and more?

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

See solution

Chapter 13 Solutions

Accounting
Show all chapter solutions
Ch. 13 - A Dividends per share Reinhardt Furniture Company...Ch. 13 - Dividends per share Zero Calories Company has...Ch. 13 - Entries for issuing stock On May 23, Stoltz Realty...Ch. 13 - Entries for issuing stock On January 22, Zentric...Ch. 13 - Entries for cash dividends The declaration,...Ch. 13 - Entries for cash dividends The declaration,...Ch. 13 - Entries for stock dividends Pro-Builders...Ch. 13 - Entries for stock dividends Antique Buggy...Ch. 13 - Entries for treasury stock On January 31,...Ch. 13 - Entries for treasury stock On May 27, Hydro...Ch. 13 - Reporting stockholders' equity Using the following...Ch. 13 - Reporting stockholders' equity Using the following...Ch. 13 - Retained earnings statement Rockwell Inc. reported...Ch. 13 - Retained earnings statement None Cruises Inc....Ch. 13 - Earnings per share Financial statement data for...Ch. 13 - Earnings per share Financial statement data for...Ch. 13 - Dividends per share Imaging Inc., a developer of...Ch. 13 - Dividends per share Lightfoot Inc., a software...Ch. 13 - Entries for issuing par stock On October 31,...Ch. 13 - Entries for issuing no-par stock On February 12,...Ch. 13 - Issuing stock for assets other than cash On April...Ch. 13 - Selected stock transactions Alpha Sounds Corp., an...Ch. 13 - Issuing stock Willow Creek Nursery, with an...Ch. 13 - Issuing stock Work Place Products Inc., a...Ch. 13 - Entries for cash dividends The declaration,...Ch. 13 - Entries for stock dividends Senior Life Co. is an...Ch. 13 - Effect of stock split Copper Grill Restaurant...Ch. 13 - Effect of cash dividend and stock split Indicate...Ch. 13 - Selected dividend transactions, stock split...Ch. 13 - Treasury stock transactions Lava Lake Inc. bottles...Ch. 13 - Treasury stock transactions Lawn Spray Inc....Ch. 13 - Treasury stock transactions Biscayne Bay Water...Ch. 13 - Reporting paid-in capital The following accounts...Ch. 13 - Stockholders' Equity section of balance sheet The...Ch. 13 - Stockholders' Equity section of balance sheet...Ch. 13 - Retained earnings statement Sumter Pumps...Ch. 13 - Stockholders' Equity section of balance sheet List...Ch. 13 - Statement of stockholders' equity The...Ch. 13 - EPS Junkyard Am, Inc., had earnings of 516,000 for...Ch. 13 - EPS Pacific Gas and Electric Company is a large...Ch. 13 - EPS Caterpillar Inc. and Deere Company are two...Ch. 13 - Dividends on preferred and common stock Pecan...Ch. 13 - Stock transactions for corporate expansion On...Ch. 13 - Selected stock transactions The following selected...Ch. 13 - Entries for selected corporate transactions Morrow...Ch. 13 - Entries for selected corporate transactions...Ch. 13 - Dividends on preferred and common stock Yosemite...Ch. 13 - Stock transaction for corporate expansion Pulsar...Ch. 13 - Selected stock transactions Diamondback Welding ...Ch. 13 - Entries for selected corporate transactions Nav-Go...Ch. 13 - Entries for selected corporate transactions West...Ch. 13 - Ethics in Action Tommy Gunn is a division manager...Ch. 13 - Ethics in Action Lou Hoskins and Shirley Crothers...Ch. 13 - Communication Motion Designs Inc. has paid...Ch. 13 - Ethics in Action Bernie libbers, the CKO of...Ch. 13 - Issuing stock Epstein Engineering Inc. began...

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions
What does the invisible hand of the marketplace do?

Principles of Microeconomics (MindTap Course List)

Describe the four forms of organizational structure.

Foundations of Business (MindTap Course List)

What are some actions that stockholders can take to ensure that managements and stockholders interests are alig...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Why must Work in Process Inventory be adjusted for factory overhead applied at year-end?

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

Should an economic model describe reality exactly?

Principles of Macroeconomics (MindTap Course List)