Analyzing and Interpreting Stockholders’ Equity and EPS Following is the stockholders’ equity section of the balance...
Analyzing and Interpreting Stockholders’ Equity and EPS
Following is the stockholders’ equity section of the balance sheet for The Procter & Gamble Company along with selected earnings and dividend data. For simplicity, balances for noncontrolling interests have been left out of income and shareholders' equity information.
| $ millions except per share amounts | 2014 | 2013 |
|---|---|---|
| Net earnings attributable to Procter & Gamble shareholders | $10,956 | $11,797 |
| Common dividends | 5,883 | 5,534 |
| Preferred dividends | 256 | 233 |
| Basic net earnings per common share | $3.82 | $4.12 |
| Diluted net earnings per common share | $3.66 | $3.93 |
| Shareholders' equity: | ||
| Convertible class A preferred stock, stated value $1 per share | $1,195 | $1,234 |
| Common stock, stated value $1 per share | 4,008 | 4,008 |
| Additional paid-in capital | 63,181 | 62,405 |
| Treasury stock, at cost (shares held: 2014--1260.8; 2013--1242.6) | (69,604) | (67,278) |
| Retained earnings | 75,349 | 70,682 |
| Accumulated other comprehensive income/(loss) | (9,333) | (2,054) |
| Other | (761) | (996) |
| Shareholders' equity attributable to Procter & Gamble shareholders | $64,035 | $68,001 |
a. Compute the number of common shares outstanding at the end of each fiscal year. Estimate the average number of shares outstanding during 2014. Round to one decimal place.
| 2014 | million | |
| 2013 | million | |
| 2014 Average | million |
b. Calculate the average cost per share of the shares held as treasury stock at the end of each fiscal year. Round to two decimal places.
| 2014 | |
| 2013 |
c. In 2014, preferred shareholders elected to convert 40 million shares of preferred stock into common stock. Rather than issue new shares, the company granted 40 million shares held in treasury stock to the preferred shareholders. Prepare a journal entry to illustrate how this transaction would have been recorded. (Hint: use the cost per share for 2013 determined in b.) Enter answers in millions. Round to the nearest million.
| Description | Debit | Credit |
|---|---|---|
| Preferred stockTreasury stockAdditional paid-in capital | ||
| Additional paid-in capital | ||
| Preferred stockTreasury stockAdditional paid-in capital |
d. Calculate P&G's return on common equity (ROCE) for fiscal 2014. Round to one decimal place.
| 2014 |
Homework Answers
ANSWER
a.
| 2014 | 2747.2 | million |
| 2013 | 2765.4 | million |
| 2014 average | 2756.3 | million |
| Working: | ||
| 2014 | 4,008.0 -1,260.8 | |
| 2013 | 4,008.0 -1,242.6 | |
b.
| 2014 | $54.14 |
| 2013 | $55.21 |
c.
| Account Title | Debit | credit |
| Preferred Stock | 40.0 | |
| Additional paid-in-capital | 2128.4 | |
| Treasury stock | 2168.4 |
d.
| Net earnings attributable to P & G shareholders | 10956 |
| Shareholders' equity attributable to P & G shareholders | 64035 |
| ROCE | 17.1% |
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