Question

Financial statement data for the years ended December 31 for Dovetail Corporation follow:

	20Y3		20Y2
Net income	$354,000		$266,500
Preferred dividends	$54,000		$54,000
Average number of common shares outstanding	60,000	shares	50,000	shares

a. Determine the earnings per share for 20Y3 and 20Y2. Round your answers to two decimal places.

20Y3	$ per share
20Y2	$ per share

b. Does the change in the earnings per share from 20Y2 to 20Y3 indicate a favorable or an unfavorable trend?

On May 27, Buzz Off Inc. reacquired 4,100 shares of its common stock at $32 per share. On August 3, Buzz Off sold 1,900 of the reacquired shares at $35 per share. November 14, Buzz Off sold the remaining shares at $31 per share.

Journalize the transactions of May 27, August 3, and November 14. For a compound transaction, if an amount box does not require an entry, leave it blank.

May 27
Aug. 3
Nov. 14

Answer 1

Answer to Question 1:

Answer a.

20Y3:

Earnings per share = (Net income - Preferred dividends) / Number of common shares outstanding
Earnings per share = ($354,000 - $54,000) / 60,000
Earnings per share = $5.00

20Y2:

Earnings per share = (Net income - Preferred dividends) / Number of common shares outstanding
Earnings per share = ($266,500 - $54,000) / 50,000
Earnings per share = $4.25

Answer b.

Yes, change in the earnings per share indicates a favourable trend.