(1) Used by investors to evaluate past performance and projections on corporate earnings.
Note: This formula assumes that the shares of outstanding stock have not
changed during the year.
(3) If stock was issued during the year then you must compute the weighted average
number of common shares outstanding during the year.
STOCK DIVIDENDS
(1) A distribution of additional stock without receiving any consideration from the
stockholder
(2) If cash is needed for capital expansion stock dividends are issued rather than cash
dividends
(3) Give a return to the stockholders indicating that the company is doing well
(8) There is a reduction of retained earnings and an increase in the contributed capital
stock account. This is referred to as capitalizing retained earning.
(9) (a) Small Stock Dividend – If the stock issued is 25% or less of the total shares
outstanding, it is considered a small stock dividend.
- Capitalize retained earnings using FMV (fair market value) of the stock to be
distributed.
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(b) Large Stock Dividend – Stock issued that is > 25% of the total shares
outstanding, it is considered a large stock dividend.
-Capitalize retained earnings for the par or stated value of the stock
(11)Entry to record stock dividend declared (Less than 25% of total shares o/s)
INCOME STATEMENT
(a) Single step presentation does not detail components of the income statement.
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Examples: - Gross sales
- Net sales
Note: The interest and taxes are deemed to be out of management’s control.
-Other income/(Expenses)
been sold, spun off, or disposed of or is the subject of the formal plan for disposal.
The change should be disclosed in the footnotes and on the face of the financial statements in the
year of the change (state the nature and justification of the change).
All of the above should be disclosed with their tax impact and their impact on EPS
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(4) So as not to mislead the financial statements EPS amounts should be stated for the
following: