Earnings per Share Progresso Corporation, one of the new audit clients, has not reported EPS data in its annual reports to stockholders in the past. The president requested that you furnish information about the reporting of EPS data in the current year’s annual report in accordance with GAAP. Required: a) Define the term earnings per share as it applies to corporation with a capitalization structure composed of only one class of common stock. Then explain how EPS should be computed and how the information should be disclosed in the corporation’s financial statements. b) Discuss the treatment, if any, that should be given to each of the following items in computing EPS for financial statement reporting: i. The declaration of current dividends on cumulative preferred stock. ii. The acquisition of some of the corporation’s outstanding common stock during the current fiscal year (The stock was classified as treasury stock). iii. A two-for-one stock split of common stock during the current fiscal year.
Earnings per Share
Progresso Corporation, one of the new audit clients, has not reported EPS data in its annual reports to stockholders in the past. The president requested that you furnish information about the reporting of EPS data in the current year’s annual report in accordance with GAAP.
Required:
a) Define the term earnings per share as it applies to corporation with a capitalization structure composed of only one class of common stock. Then explain how EPS should be computed and how the information should be disclosed in the corporation’s financial statements.
b) Discuss the treatment, if any, that should be given to each of the following items in computing EPS for financial statement reporting:
i. The declaration of current dividends on cumulative preferred stock.
ii. The acquisition of some of the corporation’s outstanding common stock
during the current fiscal year (The stock was classified as
iii. A two-for-one stock split of common stock during the current fiscal year.
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