Accounting 312- chapter 18 - Accounting 312 Chapter 18...

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Accounting 312 Chapter 18 (page 959-974) Reporting Issues- Earnings Per Share Reporting Earnings Per Share -earnings per share indicates the income earned by each share of common stock -companies report earnings per share only for common stock -must be reported on the face of the income statement (except for nonpublic companies) below net income -disclose EPS for each intermediate component of income statement Earnings Per Share- Simple Capital Structure -a corporation’s capital structure is simple if it consists of only common stock or includes no potential common stock that upon conversion or exercise could dilute earnings per common share (complex if it includes securities that could dilute earnings per common share ) -computation of earnings per share for a simple capital structure involves two items: 1. preferred stock dividends a. earnings per share relates to earnings per common share, but when a co has both common and preferred stock, it subtracts the current-year preferred stock dividend from net income to arrive at income available to common stockholders b. EPS=net inc-preferred div / weighted av number of shares outstanding c. if a co declares dividends on preferred stock and a net loss occurs, the co adds the preferred dividends to the loss for purposes of computing the loss per share d. if the preferred stock is cumulative and the co declares no dividend in the current year, it subtracts (or adds) an amt equal to the dividend that it should have declared for the current year only from net income (or to the net loss) 2. weighted average number of shares outstanding
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This note was uploaded on 01/23/2011 for the course ACCOUNTING acc312 taught by Professor Halwhite during the Fall '10 term at University of Michigan.

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Accounting 312- chapter 18 - Accounting 312 Chapter 18...

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