The Stockholders' Equity section of the balance sheet for Calhoun Industries at the end of 2016 is as follows:
The lower portion of the 2016 income statement indicates the following:
Assume that the number of shares outstanding did not change during the year.
REQUIRED:
1. Compute earnings per share before extraordinary items.
2. Compute earnings per share after the extraordinary loss.
3. Which of the two EPS ratios is more useful to management? Explain your answer. Would your answer be different if the ratios were to be used by an outsider, like a potential stockholder? Why or why not?

Question

The Stockholders' Equity section of the balance sheet for Calhoun Industries at the end of 2016 is as follows:
  The lower portion of the 2016 income statement indicates the following:
  Assume that the number of shares outstanding did not change during the year.
REQUIRED:
1. Compute earnings per share before extraordinary items.
2. Compute earnings per share after the extraordinary loss.
3. Which of the two EPS ratios is more useful to management? Explain your answer. Would your answer be different if the ratios were to be used by an outsider, like a potential stockholder? Why or why not?

Quizplus · Accepted Answer

The Answer of The Stockholders' Equity section of the balance sheet for Calhoun Industries at the end of 2016 is as follows:
  The lower portion of the 2016 income statement indicates the following:
  Assume that the number of shares outstanding did not change during the year.
REQUIRED:
1. Compute earnings per share before extraordinary items.
2. Compute earnings per share after the extraordinary loss.
3. Which of the two EPS ratios is more useful to management? Explain your answer. Would your answer be different if the ratios were to be used by an outsider, like a potential stockholder? Why or why not?

The Stockholders' Equity Section of the Balance Sheet for Calhoun