Problem 18-36 Basic Earnings per Share-Simple Capital Structure,The following condensed financial statements for Hudson Corporation were prepared by the accounting department:
Instructions: Compute the basic EPS under each of the following independent assumptions (the company has a simple capital structure). Show all calculations.
1. No change in the capital structure occurred in 2013.
2. On December 31, 2012, there were 160,000 shares outstanding. On May 1, 2013, 60,000 shares were sold at par, and on October 1, 2013, 30,000 shares were sold at par.
3. On December 31, 2012, there were 200,000 shares outstanding. On July 1, 2013, the company issued a 25% stock dividend.
Discussion Case 18-47 But Why Is EPS Different if Income Is the Same?
Fredrica Brown has $200,000 that she plans to invest in growth stocks. She has narrowed her choices to two companies in the same industry, White Inc. and Adam Inc. Each company has a documented history of growth and an established, strong position within the industry. Last year, each company reported net income of $10 million and a return on owners' investment of 17%; however, White reported EPS of $1.32, and Adam reported EPS of $2.75.Fredrica requests that you explain why the EPS differs when other measures of activity and profitability are similar. What factors contribute to and limit the comparability of these data?