Question

Comparative Statements of Retained Earnings for Renn-Dever Corporation were reported as follows for the fiscal years ending December 31, 2016, 2017, and 2018.

RENN-DEVER CORPORATION
Statements of Retained Earnings		For the Years Ended December 31
	2018			2017			2016
Balance at beginning of year	$	6,851,992		$	5,497,752		$	5,654,552
Net income (loss)		3,311,700			2,270,900			(156,800	)
Deductions:
Stock dividend (34,000 shares)		245,000
Common shares retired, September 30 (130,000 shares)					215,660
Common stock cash dividends		892,950			701,000			0
Balance at end of year	$	9,025,742		$	6,851,992		$	5,497,752

At December 31, 2015, paid-in capital consisted of the following:

Common stock, 1,830,000 shares at $1 par,	$	1,830,000
Paid in capital—excess of par		7,450,000

No preferred stock or potential common shares were outstanding during any of the periods shown.

Required:
Compute Renn-Dever’s earnings per share as it would have appeared in income statements for the years ended December 31, 2016, 2017, and 2018. (Negative amounts should be indicated by a minus sign.)

Answer 1

Solution:

Calculation of EPS For the year ended December 31, 2016:

EPS = Net Income For the Year 2016 / Outstanding number of shares = -$156800 /1830000 = - $0.08568306 or say -$0.086 (rounded)

Calculation of EPS For the year ended December 31, 2017:

Weighted average Outstanding number of Shares = [1,830,000 *9/12]+ [(1,830,000 - 130,000)*3/12]

= 1,372,500 + 425,000 = 1,797,500

EPS = $2,270,900 / 1,797,500 = $1.263 (Rounded off)

Calculation of EPS For the year ended December 31, 2018:

Weighted average Outstanding number of Shares = 1,830,000 - 130,000+ 34,000 = 1,734,000

EPS = $3,311,700 / 1,734,000 = $1.910 (Rounded off)