# Earnings per share Financial statement data for the years ended December 31 for Black Bull Inc. follow: a. Determine the earnings per share for 20Y6 and 20Y5. b. Does the change in the earnings per share from 20Y5 to 20Y6 indicate a favorable or unfavorable trend?

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

Chapter
Section

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 13, Problem 8PEB
Textbook Problem
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## Earnings per shareFinancial statement data for the years ended December 31 for Black Bull Inc. follow: a. Determine the earnings per share for 20Y6 and 20Y5. b. Does the change in the earnings per share from 20Y5 to 20Y6 indicate a favorable or unfavorable trend?

(a)

To determine

Calculate the earnings per share of Incorporation BB for the year ended December 31, 20Y6 and 20Y5.

### Explanation of Solution

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

Determine the earnings per share of Incorporation BB for the year ended December 31, 20Y6 and 20Y5.

Earnings per share forthe year ended 20Y6}Net income – Preferred dividendsAverage number of common shares outstanding=$2,485,700 –$50,000115,000 shares=$2,435,700115,000 shares$21

(b)

To determine

Identify whether the change in the earnings per share of Incorporation BB from 20Y6 to 20Y5 indicates a favorable or unfavorable trend.

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