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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Lucas Company reports net income of $5,125 for the year ended December 31, 2019, its first year of operations. On January 4, 2019, Lucas issued 9,000 shares of common stock. On August 2, 2019, it issued an additional 3,000 shares of stock, resulting in 12,000 shares outstanding at year-end.

During 2020, Lucas earned net income of $16,400. It issued 2,000 additional shares of stock on March 3, 2020, and declared and issued a 2-for-1 stock split on November 3, 2020, resulting in 28,000 shares outstanding at year-end.

During 2021, Lucas earned net income of $23,520. The only common stock transaction during 2021 was a 20% stock dividend issued on July 2, 2021.

Required:

  1. 1. Compute the basic earnings per share that would be disclosed in the 2019 annual report.
  2. 2. Compute the 2019 and 2020 comparative basic earnings per share that would be disclosed in the 2020 annual report.
  3. 3. Compute the 2019, 2020, and 2021 comparative basic earnings per share that would be disclosed in the 2021 annual report.

1.

To determine

Calculate the earnings per share amount that will be disclosed in 2019 annual report.

Explanation

Earnings per share (EPS):

The amount of net income available to each shareholder per common share outstanding is referred to as earnings per share (EPS).

Basic earnings  per share =Net income Number of  shares outstanding in common stock(1)=$5,12510,250=$0.50

Working notes:

(1) Calculate the number of shares outstanding in common stock.

Number of shares outstanding in common stock}=(Number of shares&#

2.

To determine

Calculate the 2019 and 2020 basic earnings per share amount that will be disclosed in 2020 annual report.

3.

To determine

Calculate the 2019, 2020 and 2021 basic earnings per share amount that will be disclosed in 2021 annual report.

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