Chapter 14 Investasi dalam Saham Accounting, 21st Edition Warren Reeve Fess © Copyright 2004 South-Western, a division of Thomson Learning. All rights reserved. Task Force Image Gallery clip art included in this electronic presentation is used with the permission of NVTech Inc. PowerPoint Presentation by Douglas Cloud Professor Emeritus of Accounting Pepperdine University

Laba per saham biasa

Laba Per Saham Biasa Earnings per share (EPS) is the net income per share of common stock outstanding. When unusual items exist, EPS should be reported for: Income from continuing operations Income before extraordinary items and the cumulative effect of a change in accounting principle Extraordinary items and the cumulative effect of a change in accounting principle Net income

Earnings per Common Share If there is no preferred stock: Earnings per common share = Net Income Number of common shares outstanding If there is preferred stock: Earnings per common share = Net Income – Preferred stock dividends Number of common shares outstanding

Jones Corporation Income Statement For the Year Ended December 31, 2006 Income from continuing operations $690,000 Net income $832,000 Earnings per common share: Income from continuing operations $ 3.45 Loss on discontinued operations (Note B) .50 Income before extraordinary item and cumulative effect of a change in accounting principle $2.95 Extraordinary item .75 Cumulative effect on prior years of changing to a different depreciation method .46 Net income $ 4.16

Jones Corporation Income Statement For the Year Ended December 31, 2006 Income from continuing operations $690,000 Net income $832,000 Earnings per common share: Income from continuing operations $ 3.45 Loss on discontinued operations (Note B) .50 Income before extraordinary item and cumulative effect of a change in accounting principle $2.95 Extraordinary item .75 Cumulative effect on prior years of changing to a different depreciation method .46 Net income $ 4.16

Jones Corporation Income Statement For the Year Ended December 31, 2006 Income from continuing operations $690,000 Net income $832,000 Earnings per common share: Income from continuing operations $ 3.45 Loss on discontinued operations (Note B) . 50 Income before extraordinary item and cumulative effect of a change in accounting principle $2.95 Extraordinary item .75 Cumulative effect on prior years of changing to a different depreciation method .46 Net income $ 4.16

Jones Corporation Income Statement For the Year Ended December 31, 2006 Income from continuing operations $690,000 Net income $832,000 Earnings per common share: Income from continuing operations $ 3.45 Loss on discontinued operations (Note B) .50 Income before extraordinary item and cumulative effect of a change in accounting principle $2.95 Extraordinary item .75 Cumulative effect on prior years of changing to a different depreciation method .46 Net income $ 4.16

Jones Corporation Income Statement For the Year Ended December 31, 2006 Income from continuing operations $690,000 Net income $832,000 Earnings per common share: Income from continuing operations $ 3.45 Loss on discontinued operations (Note B) .50 Income before extraordinary item and cumulative effect of a change in accounting principle $2.95 Extraordinary item .75 Cumulative effect on prior years of changing to a different depreciation method .46 Net income $ 4.16

Comprehensive Income Companies may report comprehensive income on the income statement, in a separate statement, or in the statement of stockholders’ equity.

Comprehensive Income However, comprehensive income does not include changes caused by issuing dividends or from stockholders’ investments. Comprehensive income is defined as all changes in stockholders’ equity during a period.

Stockholders’ Equity Section Common stock $ 20,000 $ 20,000 Paid-in capital in excess of par 36,000 36,000 Retained earnings 165,500 157,000 Accumulated other comprehensive income 1,290 1,200 Total stockholders’ equity $222,790 $214,200 2006 2005

Accounting for Investments in Stocks Trading securities are securities that management intends to actively trade for profit. Available-for-sale securities are securities that management expects to sell in the future, but which are not actively traded for profit.

Short-Term Investments in Stocks Temporary investments are recorded in the current asset account, Marketable Securities, at their cost.

Short-Term Investments in Stocks On June 1, Crabtree Company purchased 2,000 shares of Inis Corporation common stock at $89.75 per share plus a brokerage fee of $500. $89.75 x 2,000 shares + $500 June 1 Marketable Securities 180 000 00 Cash 180 000 00 Purchased 2,000 shares of Inis Corporation common stock.

Short-Term Investments in Stocks On October 1, Inis declared a $0.90 per share dividend payable on November 30. 2,000 shares x $0.90 Nov. 30 Cash 1 800 00 Dividend Revenue 1 800 00 Received dividend on Inis Corporation common stock.

Short-Term Investments in Stocks On the balance sheet, temporary investments are reported at their fair market value. Any difference between the fair market value and the cost is an unrealized holding gain or loss.

Short-Term Investments in Stocks At year-end, the total cost of Crabtree Co.’s four temporary investments is $690,000. The current market for these four items totaled $750,000 at year-end. Thus, Crabtree Co. had a before tax unrealized gain of $60,000.

Short-Term Investments in Stocks Crabtree Co. Balance Sheet December 31, 2006 Current assets: Cash $119,500 Temporary investments in marketable securities at cost $690,000 Plus unrealized gain (net of applicable income tax of $18,000) 42,000 732,000 Stockholders’ Equity Accumulated other comprehensive income 42,000

Statement of Comprehensive Income For the Year Ended December 31, 2006 Short-Term Investments in Stocks Crabtree Co. Statement of Comprehensive Income For the Year Ended December 31, 2006 Net income $720,000 Other comprehensive income: Unrealized gain on temporary investments in marketable securities (net of applicable tax of $18,000) 42,000 Comprehensive income $762,000

Long-Term Investments in Stocks Long-term investments are those investments made by a firm that are not intended as a source of cash in the normal operations of the business.

Long-Term Investments in Stocks Ownership % 100% Controlling Interest With less than 20% ownership the buyer does not usually have significant influence. The buyer uses the cost method to account for the investment. Equity Method 50% Significant influence Cost Method Not significant influence 20% Cost Method Not significant influence 0%

Long-Term Investments in Stocks Ownership % 100% Equity Method Ownership over 20% usually indicates significant influence. The buyer uses the equity method to account for the investment. Controlling Interest Equity Method 50% Significant influence 20% Cost Method No significant influence 0%

Long-Term Investments in Stocks On January 2, Hally Inc. pays cash of $350,000 for 40% of Brock Corporation’s common stock. Jan. 2 Investment in Brock Corp. Stock 350 000 00 Cash 350 000 00 Purchased 40% of Brock Corp. common stock.

Long-Term Investments in Stocks For the year ending December 31, Brock Corporation reports net income of $105,000. Dec. 31 Investment in Brock Corp. Stock 42 000 00 Income of Brock Corp. 42 000 00 Recorded share (40%) of Brock Corp. net income of $105,000.

Long-Term Investments in Stocks On December 31, Brock Corporation declared a $45,000 dividend, payable on December 31. Dec. 31 Cash 18 000 00 Investment in Brock Crop. Stock 18 000 00 Recorded share (40%) of dividends of $45,000 paid by Brock Corp.

Long-Term Investments in Stocks On March 1, an investment in Drey Inc. stock that had a carrying amount of $15,700 is sold for $17,500. Mar. 1 Cash 17 500 00 Investment in Drey Inc. Stock 15 700 00 Gain on Sale of Investments 1 800 00 Sold investment in Drey Inc. stock.

Business Combinations Equity Method Cost No significant influence Significant Ownership % 0% 20% Controlling Interest 100% 50% The corporation owning all or a majority of the voting stock is called the parent company. The controlled corporation is the subsidiary company. Consolidated financial statements are prepared which combines the operating results of the two entities.

Business Combinations A merger combines two corporations by one acquiring the properties of another that is then dissolved. Many businesses combine in order to produce more efficiently or to diversify product lines. A consolidation is the creation of a new corporation, to which the combined assets and liabilities of the old corporations are transferred to the new corporation.

Business Combinations Mergers Consolidations C A B A B Mergers: Company A acquires company B. The assets and liabilities of B are transferred to A and B is then dissolved. Consolidations: Company A acquires company B. The assets and liabilities of both A and B are transferred to a new company C and A and B are then dissolved.

FINANCIAL ANALYSIS AND INTERPRETATION A firm’s growth potential and future earnings prospects are indicated by how much the market is willing to pay per dollar of a company’s earnings.

Price-Earnings Ratio Accounting: Earnings Per Share Net Income Common Shares Earnings per Share of Common Stock = Investing: Price - Earnings Ratio Market Price Per Share of Common Stock Earnings Per Share of Common Stock Price- Earnings Ratio =

Price-Earnings Ratio The price-earnings ratio represents how much the market is willing to pay per dollar of a company’s earnings. This indicates the market’s assessment of a firm’s growth potential and future earnings prospects. An example: 2006 2005 Market price per share $20.50 $13.50 Earnings per share $1.64 $1.35 Price-earnings ratio 12.5 10.0 The price-earnings ratio indicates that a share of common stock was selling for 10 times earnings for 2005 and 12.5 times for 2006.

Chapter 14 The End