ch 17 - 17 EARNINGS PER SHARE AND RETAINED EARNINGS CHAPTER...

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Unformatted text preview: 17 EARNINGS PER SHARE AND RETAINED EARNINGS CHAPTER OBJECTIVES After careful study of this chapter, students will be able to: 1. Compute basic EPS. 2. Understand how to compute the weighted average common shares for EPS. 3. Identify the potential common shares included in diluted EPS. 4. Apply the treasury stock method for including share options and warrants in diluted EPS. 5. Calculate the impact of a convertible security on diluted EPS. 6. Compute diluted EPS. 7. Record the declaration and payment of cash dividends. 8. Account for a property dividend. 9. Explain the difference in accounting for small and large stock dividends. 17-1 10. Understand how to report accumulated other comprehensive income. 11. Prepare a statement of changes in stockholders' equity. 17-2 SYNOPSIS Earnings and Earnings Per Share Information 1. FASB Statement No. 128 entitled contains the current standards for calculating and reporting earnings per share. 2. External decision makers often consider earnings per share to be the best single measure for summarizing a corporation's performance. Earnings per share information is helpful to users in evaluating a corporation's return on investment and risk . Earnings per share can be used to predict future cash flows per share, to compare intercompany performance using the price/earnings ratio, and to indicate the potential impact of the issuance of common share options, convertible debt, or convertible preferred stock on future earnings per share. Basic Earnings Per Share 3. A simple capital structure consists of only common stock. For a simple capital structure, basic earnings per share is required for reporting purposes and is computed using the following equation: Net Income - Preferred Dividends Basic Earnings per Share = Weighted Average Number of Common Shares Outstanding Basic earnings per share is reported on a corporation's income statement directly below net income. The numerator is the earnings available to common stockholders. Included in the preferred dividends that are subtracted in the numerator are dividends on noncumulative preferred stock that have been declared, as well as the current dividends on cumulative preferred stock whether or not they have been declared....
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This note was uploaded on 06/11/2008 for the course ACCT 3023 taught by Professor Fasci during the Spring '08 term at The University of Texas at San Antonio- San Antonio.

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ch 17 - 17 EARNINGS PER SHARE AND RETAINED EARNINGS CHAPTER...

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