04 earningspershare netincomeoutstandingshares before

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Unformatted text preview: ect creditors in times of dissolution or bankruptcy, but over time the concept has lost its appeal as creditors have found better ways to protect themselves. E12–4 a. Treasury Stock (–SE) 1,000 Cash (–A) 1,000 Acquired treasury stock. (Dollars in millions) b. Debt/Equity = Total Liabilities ÷ Total Stockholders' Equity Before After c. = $1,048 ÷ $2,012 = 0.52 = $1,048 ÷ ($2,012 – $1,000) = 1.04 Earnings per Share = Net Income ÷ Outstanding Shares Before After d. = $94 ÷ 125.5 Shares = $0.75 per Share = $94 ÷ (125.5 Shares Issued – 26 Treasury Shares) = $0.94 per Share A company might choose to purchase treasury stock at year end in order to reduce the number of shares outstanding as of year­end. A smaller number of shares outstanding will increase the earnings per share (based on average # of shares outstanding during the year). E12–5 a. (1 ) (2 ) (3 ) (4 ) (5 ) Cash (+A) Common Stock (+SE) Additional Paid­In Capital, Common Stock (+SE) Issued common stock. 500,000 Cash (+A) Preferred Stock (+SE) Issued preferred stock. 60,000 Treasury Stock (–SE) Cash (–A) Repurchased treasury stock. 45,000 Cash (+A) Treasury Stock (+SE) Additional Paid­In Capital, Treasury Stock (+SE)...
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