Question

Financial statement data for years ending December 31 for Jardine Company are shown below. 2016 2015 Net income $491,500 $421,500 Preferred dividends $75,000 $75,000 Average number of common shares outstanding 70,000 shares 55,000 shares a. Determine the earnings per share for 2016 and 2015. Round your answers to two decimal places. 2016 $ per share 2015 $ per share b. Does the change in the earnings per share from 2015 to 2016 indicate a favorable or an unfavorable trend?

Answer 1

a. Determine the earnings per share for 2016 and 2015. 2016 $5.95 per share 2015 $6.30 per share b. Does the change in the earnings per share from 2015 to 2016 indicate a favorable or an unfavorable trend? Unfavorable Explanation: a. Determine the earnings per share for 2016 and 2015. 2016: Earnings per share = (Net Income - Preferred Dividends) / Average number of common shares outstanding Earnings per share = ($491,500 – $75,000) / 70,000 shares Earnings per share = ($416,500 / 70,000 shares) Earnings per share = $5.95 per share 2015: Earnings per share = (Net Income - Preferred Dividends) / Average number of common shares outstanding Earnings per share = ($421,500 - $75,000 ) / 55,000 shares Earnings per share = ($346,500 / 55,000 shares) Earnings per share = $6.30 per share b. Does the change in the earnings per share from 2015 to 2016 indicate a favorable or an unfavorable trend? 2015 2016 Increase (Decrease) Earnings per share $6.30 $5.95 $(0.35)