1. Chapter 13-1 Corporations Accounting Accounting Principles, Ninth Edition Corporations: Organization and Capital Stock Transactions: Acknowledgement: Most of the slides have been taken from Keise Accounting Principles, Ninth edition Some slides have been altered and some new slides inserted to meet the local regulatory environment in Pakistan

2. Chapter 13-2 1. 1.Corporations: Introduction & Major Attributes 2. 2.Shares Capital and Accounting for Shares Capital 3. 3.Dividends & Retained Earnings 4. 4.Quiz Today we shall cover these concepts and basic accounting issues, which are scattered in Ch13 and Ch14. In next session, we shall discuss application of these concepts through a case study / short problems that shall be uploaded on group shortly, insha Allah Study Objectives – Session 9

3. Chapter 13-3 An entity separate and distinct from its owners. The Corporate Form of Organization Classified by Purpose Not-for-Profit For Profit Classified by Ownership Publicly held Privately held  ICI Limited  Ford Motor Company  PepsiCo  Google  Salvation Army  American Cancer Society  Gates Foundation  Amex

4. Chapter 13-4 Separate Legal Existence Limited Liability of Stockholders Transferable Ownership Rights Ability to Acquire Capital Continuous Life Government Regulations Additional Taxes Corporate Management Characteristics that distinguish corporations from proprietorships and partnerships. Characteristics of a Corporation SO 1 Identify the major characteristics of a corporation. Advantages Disadvantages

5. Chapter 13-5 Separate Legal Existence Limited Liability of Stockholders Transferable Ownership Rights Ability to Acquire Capital Continuous Life Government Regulations Additional Taxes Corporate Management Characteristics that distinguish corporations from proprietorships and partnerships. Characteristics of a Corporation SO 1 Identify the major characteristics of a corporation. Corporation acts under its own name rather than in the name of its stockholders.

6. Chapter 13-6 Separate Legal Existence Limited Liability of Stockholders Transferable Ownership Rights Ability to Acquire Capital Continuous Life Government Regulations Additional Taxes Corporate Management Characteristics that distinguish corporations from proprietorships and partnerships. Characteristics of a Corporation SO 1 Identify the major characteristics of a corporation. Limited to their investment.

7. Chapter 13-7 Separate Legal Existence Limited Liability of Stockholders Transferable Ownership Rights Ability to Acquire Capital Continuous Life Government Regulations Additional Taxes Corporate Management Characteristics that distinguish corporations from proprietorships and partnerships. Characteristics of a Corporation SO 1 Identify the major characteristics of a corporation. Shareholders may sell their stock.

8. Chapter 13-8 Separate Legal Existence Limited Liability of Stockholders Transferable Ownership Rights Ability to Acquire Capital Continuous Life Government Regulations Additional Taxes Corporate Management Characteristics that distinguish corporations from proprietorships and partnerships. Characteristics of a Corporation SO 1 Identify the major characteristics of a corporation. Corporation can obtain capital through the issuance of stock.

9. Chapter 13-9 Separate Legal Existence Limited Liability of Stockholders Transferable Ownership Rights Ability to Acquire Capital Continuous Life Government Regulations Additional Taxes Corporate Management Characteristics that distinguish corporations from proprietorships and partnerships. Characteristics of a Corporation SO 1 Identify the major characteristics of a corporation. Continuance as a going concern is not affected by the withdrawal, death, or incapacity of a stockholder, employee, or officer.

10. Chapter 13-10 Separate Legal Existence Limited Liability of Stockholders Transferable Ownership Rights Ability to Acquire Capital Continuous Life Government Regulations Additional Taxes Corporate Management Characteristics that distinguish corporations from proprietorships and partnerships. Characteristics of a Corporation SO 1 Identify the major characteristics of a corporation.

11. Chapter 13-11 Separate Legal Existence Limited Liability of Stockholders Transferable Ownership Rights Ability to Acquire Capital Continuous Life Government Regulations Additional Taxes Corporate Management Characteristics that distinguish corporations from proprietorships and partnerships. Characteristics of a Corporation SO 1 Identify the major characteristics of a corporation. Corporations pay income taxes as a separate legal entity and in addition, stockholders pay taxes on cash dividends.

12. Chapter 13-12 Separate Legal Existence Limited Liability of Stockholders Transferable Ownership Rights Ability to Acquire Capital Continuous Life Government Regulations Additional Taxes Corporate Management Characteristics that distinguish corporations from proprietorships and partnerships. Characteristics of a Corporation SO 1 Identify the major characteristics of a corporation. Separation of ownership and management prevents owners from having an active role in managing the company.

13. Chapter 13-13 File application with the Secretary of State. Important Documentation Memorandum of Association Articles of Association Prospectus Certificate of Incorporation Initial Steps: Forming a Corporation SO 1 Identify the major characteristics of a corporation.

14. Chapter 13-14 Required only when shares are to be issued in public and this is normally done after the formation of company - Initial Public Offer - Offer for Sale It contains information like past financial statements to date purpose to which the fund shall be used forecasted financial statements etc. Prospectus: Forming a Corporation SO 1 Identify the major characteristics of a corporation.

15. Chapter 13-15 1.Vote in election of board of directors and on actions that require stockholder approval. Stockholders have the right to: Ownership Rights of Stockholders SO 1 Identify the major characteristics of a corporation. 2.Share the corporate earnings through receipt of dividends. Illustration 13-3

16. Chapter 13-16 3.Keep the same percentage ownership when new shares of stock are issued (preemptive right * ). Stockholders have the right to: Ownership Rights of Stockholders SO 1 Identify the major characteristics of a corporation. * A number of companies have eliminated the preemptive right. Illustration 13-3

17. Chapter 13-17 4.Share in assets upon liquidation in proportion to their holdings. This is called a residual claim. Stockholders have the right to: Ownership Rights of Stockholders SO 1 Identify the major characteristics of a corporation. Illustration 13-3

18. Chapter 13-18 Stock Issue Considerations SO 1 Identify the major characteristics of a corporation. MOA indicates the amount of stock that a corporation is authorized to sell. Number of authorized shares is often reported in the stockholders’ equity section Answer Why? Does this requires any entry? Authorized Stock

19. Chapter 13-19 Stock Issue Considerations SO 1 Identify the major characteristics of a corporation. Factors in setting price for a new issue of stock: 1.the company’s anticipated future earnings 2.its expected dividend rate per share 3.its current financial position (assets and liabilities) 4.the current state of the economy 5.the current state of the securities market Issuance of Stock

20. Chapter 13-20 Stock Issue Considerations SO 1 Identify the major characteristics of a corporation. Stock of publicly held companies is traded on organized exchanges. Interaction between buyers and sellers determines the prices per share. Prices set by the marketplace tend to follow the trend of a company’s earnings and dividends. Factors beyond a company’s control, may cause day- to-day fluctuations in market prices. Market Value of Stock

21. Chapter 13-21

22. Chapter 13-22 Stock Issue Considerations SO 1 Identify the major characteristics of a corporation. Par value determined the legal capital per share that a company must retain in the business. Easy to understand, it is the face value of a share. In Pakistan this is normally Rs.10 No-par value stock is quite common today in US, but not in Pakistan. Par and No-Par Value Stock

23. Chapter 13-23 Paid-in Capital Retained Earnings / Un-appropriated Profit Paid-in Capital in Excess of Par / Shares Premium Account Account Two Primary Sources of Equity Common Stock / Ord. Shares Capital Preferred Stock / Preferred Shares Capital Corporate Capital SO 2 Differentiate between paid-in capital and retained earnings.

24. Chapter 13-24 Corporate Capital SO 2 Differentiate between paid-in capital and retained earnings. Comparison of the owners’ equity (stockholders’ equity) accounts reported on a balance sheet for a proprietorship, a partnership, and a corporation. Note that these two are not the only account in owners’ equity section of a company, but there are many more Illustration 13-6

25. Chapter 13-25 Illustration: Illustration: Assume that Hydro-Slide, Inc. issues 1,000 shares of $1 par value common stock at par for. Prepare the journal entry. Cash1,000 Common stock (1,000 x $1) / 1,000 Ord. Shares Capital SO 3 Record the issuance of common stock. Accounting for Common Stock Issues Issuing Par Value Common Stock for Cash

26. Chapter 13-26 Illustration: Illustration: Assume that Hydro-Slide, Inc. issues 2,000 shares of $1 par value common stock. Prepare Hydro-Slide’s journal entry if (a) 1,000 share are issued for $1 per share, and (b) 1,000 shares are issued for $5 per share. Cash1,000 Common stock / (1,000 x $1) 1,000 Ord. Shares Capital Cash5,000 Common stock (1,000 x $1) 1,000 Ord. Shares Capital Paid-in capital in excess of par value / 4,000 Ordinary Shares Premium a. b. Accounting for Common Stock Issues SO 3 Record the issuance of common stock. Issuing Par Value Common Stock for Cash

27. Chapter 13-27 Jan 15 th - Shifa Hospital Invited applications for issue of its 10,000 shares of par Rs.10 each at Rs.12. No Entry Jan 20 th – Received share applications for 15,000 shares with bank deposits of application money Bank180,000 Share Applications180,000 Accounting for Common Stock Issues SO 3 Record the issuance of common stock. Infact, actually issue of shares involves a process Whereby more accounts are involved

28. Chapter 13-28 Feb 8 th – Decided over successful candidates through balloting Share Applications120,000 Shares Capital100,000 Shares Premium 20,000 Feb 11 th – Refunded money to unsuccessful candidates Share Applications60,000 Bank60,000 Accounting for Common Stock Issues SO 3 Record the issuance of common stock. Infact, actually issue of shares involves a process Whereby more accounts are involved

29. Chapter 13-29 The fixation of issue price pose a risk of over or under subscription If oversubscribed, means issue price could have been set on higher side. If undersubscribed, means price market percetion of issue price is too high. Underwritting do not serve to mitigate this risk hundred percent Accounting for Common Stock Issues SO 3 Record the issuance of common stock. Book Building Process

30. Chapter 13-30 The Book Building Process is a recent development subscribed in Pakistan too since last couple of years The issue is divided into first and second issue First issue is at open bid for major buyers only with minimum price limit Once price is fixed in first issue, the second issue is floated at this price Accounting for Common Stock Issues SO 3 Record the issuance of common stock. Book Building Process

31. Chapter 13-31 Accounting for Common Stock Issues SO 3 Record the issuance of common stock. Illustration 13-7

32. Chapter 13-32 Issuing Common Stock for Services or Noncash Assets Corporations also may issue stock for: Services (attorneys or consultants). Noncash assets (land, buildings, and equipment). Accounting for Common Stock Issues SO 3 Record the issuance of common stock. Cost is either the fair market value of the consideration given up, or the fair market value of the consideration received, whichever is more clearly determinable.

33. Chapter 13-33 Illustration: Assume that attorneys have helped Jordan Company incorporate. They have billed the company $5,000 for their services. They agree to accept 4,000 shares of $1 par value common stock in payment of their bill. At the time of the exchange, there is no established market price for the stock. Prepare the journal entry for this transaction. Organizational expense5,000 Common stock (4,000 x $1) 4,000 Paid-in capital in excess of par1,000 SO 3 Record the issuance of common stock. Accounting for Common Stock Issues

34. Chapter 13-34 Illustration: Assume that Athletic Research Inc. is an existing publicly held corporation. Its $5 par value stock is actively traded at $8 per share. The company issues 10,000 shares of stock to acquire land recently advertised for sale at $90,000. Prepare the journal entry for this transaction. Land (10,000 x $8) 80,000 Common stock (10,000 x $5) 50,000 Paid-in capital in excess of par30,000 SO 3 Record the issuance of common stock. Accounting for Common Stock Issues

35. Chapter 13-35 Paid-in Capital Retained Earnings Account Account Paid-in Capital in Excess of Par Account Account Less: Treasury Stock AccountLess: Treasury Stock Account Two Primary Sources of Equity Common Stock Account Account Preferred Stock Account Account Accounting for Treasury Stock SO 4 Explain the accounting for treasury stock.

36. Chapter 13-36 Treasury stock - corporation’s own stock that it has reacquired from shareholders, but not retired. Corporations purchase their outstanding stock: 1.To reissue the shares to officers and employees under bonus and stock compensation plans. 2.To enhance the stock’s market value. 3.To have additional shares available for use in the acquisition of other companies. 4.To increase earnings per share. 5.To rid the company of disgruntled investors, perhaps to avoid a takeover. Accounting for Treasury Stock SO 4 Explain the accounting for treasury stock.

37. Chapter 13-37 Not allowed in Pakistan, now again Accounting for Treasury Stock SO 4 Explain the accounting for treasury stock.

38. Chapter 13-38 Features often associated with preferred stock. 1. Preference as to dividends. 2. Preference as to assets in liquidation. 3. Nonvoting. 4. Normally fixed dividends (like interest) 5. Normally cumulative 6. May be participative 7. May be redeemable 8. May be convertible SO 5 Differentiate preferred stock from common stock. Preferred Stock Accounting for preferred stock at issuance is similar to that for common stock.

39. Chapter 13-39 Illustration: Stine Corporation issues 10,000 shares of $10 par value preferred stock for $12 cash per share. Journalize the issuance of the preferred stock. SO 5 Differentiate preferred stock from common stock. Preferred Stock Cash120,000 Preferred stock (10,000 x $10) 100,000 Paid-in capital in excess of par – Preferred stock20,000 Preferred stock may have a par value or no-par value.

40. Chapter 13-40 Dividend Preferences Right to receive dividends before common stockholders. Per share dividend amount is stated as a percentage of the preferred stock’s par value or as a specified amount. Cumulative dividend – holders of preferred stock must be paid their annual dividend plus any dividends in arrears before common stockholders receive dividends. SO 5 Differentiate preferred stock from common stock. Preferred Stock

41. Chapter 13-41 SO 6 Prepare a stockholders’ equity section. Statement Presentation Illustration 13-12

42. Chapter 13-42 Book Value per share (Break-up value) It is the net value per share from the balance sheet on a certain date. More precisely, it is the amount represented by on share in the net assets of the company BV = T o t a l SHE – P r e f. S t o c k no. of outstanding common shares Although the preferred stock itself is deducted in numerator, shares premium on preferred shares is normally not deducted SO 5 Differentiate preferred stock from common stock. Statement Analysis

43. Chapter 13-43 What information Book Value conveys? Tips: See from liquidation perspective See from market value perspective SO 5 Differentiate preferred stock from common stock. Statement Analysis

44. Chapter 13-44 Chapter 13 Ended CopyrightCopyright

45. Chapter 13-45 Chapter 14 Accounting Principles, Ninth Edition Corporations: Dividends, Retained Earnings, and Income Reporting

46. Chapter 13-46 A distribution of cash or stock to stockholders on a pro rata (proportional) basis. Types of Dividends: DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends. 1. Cash dividends. 2. Property dividends. Dividends expressed: (1) as a percentage of the par or stated value, or (2) as a dollar amount per share. 3. Stock dividends.

47. Chapter 13-47 Par Value Rs.10 Number of shares issued 100,000 Net Income for the year Rs.60,000 Dividend amount total Rs.40,000 Dividend Rate (%): ? Per share dividend: ? DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends.

48. Chapter 13-48 Par Value Rs.10 Number of shares issued 100,000 Net Income for the year Rs.60,000 Dividend amount total: ? Dividend Rate (%): 20% Per share dividend: ? DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends.

49. Chapter 13-49 Par Value Rs.10 Number of shares issued 100,000 Net Income for the year Rs.60,000 Dividend amount total: ? Dividend Rate (%): ? Per share dividend: Rs.4.5 DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends.

50. Chapter 13-50 What kind of property dividends a company pay? DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends. 1. Cash dividends. 2. Property dividends. 3. Stock dividends.

51. Chapter 13-51 The following dates and events are important in respect of dividend Dividends – Important Dates 1 SO 1 Prepare the entries for cash dividends and stock dividends. Period Closure Date The date for which financial statements are prepared (not published, because actual preparation and publishing takes place much after the effective date) Entry?

52. Chapter 13-52 The following dates and events are important Dividends – Important Dates 2 SO 1 Prepare the entries for cash dividends and stock dividends. Dividends Declaration (Results Announcement) Date Or BOD Meeting Date: On this date companies announce their results via fax or email to stock exchange in brief after the same being recommended in BOD meeting Entry?

53. Chapter 13-53 The following dates and events are important Dividends – Important Dates 3 SO 1 Prepare the entries for cash dividends and stock dividends. Book Closure Date The date on which share transfer books are closed. This is normally a seven to ten days period Entry? Q: Why this date? (white text) To determine dividend’s entitlement. The shareholder registered up to this date will get the dividends

54. Chapter 13-54 The following dates and events are important Dividends – Important Dates 3 SO 1 Prepare the entries for cash dividends and stock dividends. Annual General Meeting / Approval Date Date on which shareholders meet to approve dividends Entry? Yes

55. Chapter 13-55 Cash Dividends For a corporation to pay a cash dividend, it must have: 1. 1.Retained earnings - Payment of cash dividends from retained earnings is legal in all states. 2. 2.Adequate cash. 3. 3.A declaration and approval of dividends by the Board of Directors and approval by shareholders in AGM. DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends.

56. Chapter 13-56 Illustration: On Dec. 1, the directors of Media General declare a 50¢ per share cash dividend on 100,000 shares of Rs.10 par value common stock. On December 22 nd, the shareholders approved the dividend in AGM. The dividend is payable on Jan. 20 to shareholders of record on Dec. 21st? December 22 nd (Declaration Date) Approval Date Retained earnings 50,000 Dividends payable 50,000 December 21 st (Date of Record / Book closure date) January 20 (Payment Date) DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends. Dividends payable 50,000 Cash 50,000 No entry

57. Chapter 13-57 Allocating Cash Dividends Between Preferred and Common Stock DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends. Holders of cumulative preferred stock must be paid any unpaid prior-year dividends before common stockholders receive dividends.

58. Chapter 13-58 DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends. Illustration: On December 31, 2010, IBR Inc. has 1,000 shares of 8%, Rs.100 par value cumulative preferred stock. It also has 50,000 shares of Rs.10 par value common stock outstanding. At December 31, 2010, the directors declare a Rs.6,000 cash dividend. Prepare the entry to record the declaration of the dividend. Retained earnings 6,000 Dividends payable 6,000 Pfd Dividends: 1,000 shares x Rs.100 par x 8% = Rs.8,000 Umpaid = Rs.2000

59. Chapter 13-59 DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends. * 1,000 shares x Rs.100 par x 8% = Rs.8,000 * ** 2010 Pfd. dividends Rs.8,000 – declared Rs.6,000 = Rs.2,000 ** Illustration: At December 31, 2011, IBR declares a Rs.50,000 cash dividend. Show the allocation of dividends to each class of stock. 50,000 2,000 8,000 40,000

60. Chapter 13-60 Stock Dividends Pro rata distribution of the corporation’s own stock. DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends. Results in decrease in retained earnings and increase in paid-in capital. Illustration 14-3

61. Chapter 13-61 Stock Dividends Reasons why corporations issue stock dividends: 1. 1.To satisfy stockholders’ dividend expectations without spending cash. 2. 2.To increase the marketability of the corporation’s stock. 3. 3.To emphasize that a portion of stockholders’ equity has been permanently reinvested in the business. DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends.

62. Chapter 13-62 Size of Stock Dividends Small stock dividend (less than 20–25% of the corporation’s issued stock, recorded at fair market value) Large stock dividend (greater than 20–25% of issued stock, recorded at par value) Both are same from our regulatory environment perspective. Both are recorded at Par DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends. *

63. Chapter 13-63 10% stock dividend is declared Retained earnings (5,000 x 10% x Rs.10) 5000 Common stock dividends distributable 5000 Stock issued Common stock div. distributable5000 Common stock (5,000 x 10% x Rs.10) 5000 Illustration: HH Inc. has 5,000 shares issued and outstanding. The per share par value is Rs.10, book value Rs.32 and market value is Rs.40. DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends.

64. Chapter 13-64 Stockholders’ Equity with Dividends Distributable DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends.

65. Chapter 13-65 DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends. Effects of Stock Dividends

66. Chapter 13-66 In the stockholders’ equity section, Common Stock Dividends Distributable is reported as a(n): a.deduction from total paid-in capital and retained earnings. b.current liability. c.deduction from retained earnings. d.addition to capital stock. Question DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends.

67. Chapter 13-67 Stock Split Reduces the market value of shares. No entry recorded for a stock split. Decrease par value and increase number of shares. DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends.

68. Chapter 13-68 2 for 1 Stock Split No Entry -- Disclosure that par is now Rs.0.50 and shares outstanding are 10,000. Illustration: HH Inc. has 5,000 shares issued and outstanding. The per share par value is Rs.1, book value Rs.32 and market value is Rs.40. DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends.

69. Chapter 13-69

70. Chapter 13-70 DividendsDividends SO 1 Prepare the entries for cash dividends and stock dividends. Effects of Stock Splits

71. Chapter 13-71 Retained earnings is net income that a company retains for use in the business. Net income increases Retained Earnings and a net loss decreases Retained Earnings. Retained earnings is part of the stockholders’ claim on the total assets of the corporation. A debit balance in Retained Earnings is identified as a deficit. Retained Earnings SO 2 Identify the items reported in a retained earnings statement.

72. Chapter 13-72 Restrictions can result from: 1. 1.Legal restrictions. 2. 2.Contractual restrictions. 3. 3.Voluntary restrictions. Retained Earnings Restrictions SO 2 Identify the items reported in a retained earnings statement. Companies generally disclose retained earnings restrictions in the notes to the financial statements.

73. Chapter 13-73 Corrections of Errors Result from:  mathematical mistakes  mistakes in application of accounting principles  oversight or misuse of facts Corrections treated as prior period adjustments Adjustment made to the beginning balance of retained earnings (commonly known as restatement of retained earnings) Prior Period Adjustments SO 2 Identify the items reported in a retained earnings statement.

74. Chapter 13-74 Before issuing the report for the year ended December 31, 2010, you discover a Rs.50,000 error (net of tax) that caused the 2009 inventory to be overstated (overstated inventory caused COGS to be lower and thus net income to be higher in 2009. Would this discovery have any impact on the reporting of the Statement of Retained Earnings for 2010? Prior Period Adjustments SO 2 Identify the items reported in a retained earnings statement.

75. Chapter 13-75 Retained Earnings Statement SO 2 Identify the items reported in a retained earnings statement.

76. Chapter 13-76 Retained Earnings Statement SO 2 Identify the items reported in a retained earnings statement. The company prepares the statement from the Retained Earnings account. Illustration 14-13

77. Chapter 13-77 SO 3 Prepare and analyze a comprehensive stockholders’ equity section. Statement Analysis and Presentation Illustration 14-15

78. Chapter 13-78 Stockholders’ Equity Analysis Net Income Available to Common Stockholders Return on Common Stockholders’ Equity = Average Common Stockholders’ Equity SO 3 Prepare and analyze a comprehensive stockholders’ equity section. Statement Analysis and Presentation This ratio shows how many dollars of net income the company earned for each dollar invested by the stockholders.

79. Chapter 13-79 Income Statement Presentation SO 4 Describe the form and content of corporation income statements. Statement Analysis and Presentation Illustration 14-17

80. Chapter 13-80 Income Statement Analysis Net Income minus Preferred Dividends Earnings Per Share = Weighted-Average Common Shares Outstanding SO 5 Compute Earnings Per Share. Statement Analysis and Presentation This ratio indicates the net income earned by each share of outstanding common stock.

81. Chapter 13-81 The income statement for Nadeen, Inc. shows income before income taxes Rs.700,000, income tax expense Rs.210,000, and net income Rs.490,000. If Nadeen has 100,000 shares of common stock outstanding throughout the year, earnings per share is: a.Rs.7.00. b.Rs.4.90. c.Rs.2.10. d.No correct answer is given. Question (Rs.490,000 / 100,000 = Rs.4.90) SO 5 Compute Earnings Per Share. Statement Analysis and Presentation

82. Chapter 13-82 Assume Searle finds growth opportunities within same business and need needs a Rs.1.00 billion extra finance. Suggest a likely price at which Searle should issue its new shares capital. Support your answer with brief valid arguments. Also identify the maximum limit of news shares Searle can issue without amending its MOA. SO 5 Compute Earnings Per Share.

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