Documente Academic
Documente Profesional
Documente Cultură
Below are brief descriptions of each problem and case. These descriptions are accompanied by the
estimated time (in minutes) required for completion and by a difficulty rating. The time estimates assume
use of the partially filled-in working papers.
Problems (Sets A and B)
12.1 A,B Greater Asian Airlines/Pacific Airlines 30 Easy
Preparation of a condensed income statement and earnings per
share figures for a company with a discontinued segment and an
extraordinary loss. Emphasizes format of the income statement
rather than computation of amounts. Students also are asked to
forecast future operating results.
1. The purpose of presenting subtotals such as Profit from Continuing Operations and Profit from
Discontinued Operations is to assist users of the income statement in making forecasts of future
earnings. By excluding the operating results of discontinued operations and the effects of unusual
and nonrecurring transactions, these subtotals indicate the amount of income derived from the
companys ongoing, normal operations.
2. The discontinued operations classification is used in the income statement only when a business
discontinues an entire segment of its activities. Franks has two business segmentspizza parlors
and the baseball team. Only if one of these segments is discontinued in its entirety will the
company report discontinued operations. The sale or closure of a few parlors does not represent the
disposal of the pizza parlor segment of the companys business activities.
3. Extraordinary items are defined as 'income or expenses that arise from events or transactions that
are clearly distinct from the ordinary activities of the enterprise and therefore are not expected to
recur frequently or regularly'.
According IAS 1 paragraph 85, "An entity shall not present any items of income and expense as
extraordinary items, either on the face of the income statement or in the notes." It is because items
treated as extraordinary result from the normal business risks faced by an entity and do not warrant
presentation in a separate component of the income statement. The nature or function of a
transaction rather than frequency, should determine its presentation within the income statement.
Items currently classified as 'extraordinary' are only a subset of the items of income and expense
that may warrant disclosure to assist users in predicting an entity's future performance.
4. The restructuring charges should be combined and presented as a line item in the companys
income statement in determining operating income.
In predicting future earnings for the company, the charges generally should not be considered to be
costs that will be incurred in the future. In fact, if the program of downsizing is successful,
operating results in the future could be expected to improve as a result of having incurred the
restructuring charges.
5. A material error represents a correction of an error in the amount of income reported in a prior
period. A material error are shown in the statement of changes in equity (or statement of
shareholders equity) as an adjustment to the balance of retained earnings at the beginning of the
period in which the error is identified.
6. Irregular income items, such as discontinued operations, and material error, are legitimate parts of
the earnings history of a company. On the other hand, they are non-recurring and should not carry
the same weight in evaluating future profitability as normal, recurring operating revenues and
expenses.
7. a. The current-year preference share dividend is deducted from profit to determine the earnings
allocable to the ordinary shareholders. (the preference share dividend is deducted only if
declared.)
8. No, the number of ordinary shares used in computing earnings per share may be different from
that used to determine book value per share. In computing earnings per share, earnings
allocable to the ordinary shareholders is divided by the weighted-average number of ordinary
shares outstanding throughout the period. In computing book value per share at a specified date,
shareholders' equity allocable to the ordinary shareholders is divided by the number of ordinary
shares actually outstanding on that date. If the number of ordinary shares outstanding has not
changed during the period, the weighted-average number of ordinary shares outstanding during
the period will be equal to the number of ordinary shares outstanding on a particular date.
9. a. The price-earnings ratio is computed by dividing the market price of a share of ordinary
share by the annual earnings per share.
b. The amount of basic earnings per share is computed by dividing the profit available for
ordinary share by the weighted-average number of ordinary shares outstanding during the
year.
c. The amount of diluted earnings per share is computed by dividing profit by the maximum
potential number of shares outstanding after convertible securities are assumed to have been
converted.
12. Date of declaration is the day the obligation to pay a dividend comes into existence by action
of the board of directors. Date of record is the day on which the particular shareholders who
are entitled to receive a dividend is determined. Persons listed in the corporate records as
owning share on this day will receive the dividend. Date of payment is the day the dividend is
distributed by the corporation. Ex-dividend date (usually three business days prior to the date
of record) is the day on which the right to receive a recently declared dividend no longer
attaches to share. As a result, the market price of the shares usually falls by the
amount of the dividend.
A stock dividend occurs when there is a relatively small increase in the number of shares issued, with
no change in the net assets of the company but a transfer from retained earnings to the issued and paid
capital section of the balance sheet. The par value of share remains the same.
The distinction in the accounting treatment of a stock dividend and a share split stems directly from
the difference in the effect on stated (legal) capital and retained earnings. There is no difference in the
probable effect on per-share market price of a stock dividend and a share split of equal size, although
share splits are usually much larger than stock dividends.
15. Restructuring charges result when the company incurs costs in the process of reorganization, often
downsizing. The purpose of reorganization is to benefit future operations in terms of more efficient
operations, but the cost is ordinarily charged to current operations. Restructuring charges are not
extraordinary items, and unless they directly related to a discontinued part of the business, are not
presented as discontinued operations. They are often presented as a single line item in the income
statement, before income taxes.
16. Three items that may be shown in a statement of comprehensive income as causing changes in the
balance of retained earnings are:
18. A liquidating dividend is a return of the investment made in the company to the investor, in contrast to
a non-liquidating dividend which is a return on the investment in the company. A liquidating dividend
occurs when dividends are distributed in excess of a companys retained earnings.
Revenues $1,500,000
Expenses 1,200,000
Operating Profit $300,000
IFRS does not allow the presentation of extraordinary item in the financial statements
88,000
25,000
$113,000
D
uity
____
$100,000
$460,000
(65,000)
$495,000
250,000
$745,000
120,000
$625,000
$600,000
562,500
$1,162,500
1,162,500
b. Since Smiley is a small and growing corporation, the board of directors probably
decided that cash from operations was needed to finance the companys expanding
operations.
c. You are probably better off because of the boards decision not to declare cash
dividends. Smiley was obviously able to invest the funds to earn a high rate of
return, as evidenced by the value of your investment, which has grown from
$1,000 to $17,280.
Ex. 12.2
a. None (Treasury share is not an asset; it represents shares that have been
reacquired by the company, not shares that have not yet been issued.)
b. Stock dividend
c. Share premium
d. Retrospective restatement
e. P/e ratio (Market price divided by earnings per ordinary share.)
f. Discontinued operations (Showing the discontinued operations in a separate
section of the income statement permits presentation of the subtotal, Income from
Continuing Operations.)
g. Diluted earnings per share
h. Total comprehensive income
b. The $1.70 earnings per share before continuing operations is the figure used to compute the price-ea
Global Exports. If a company reports a gain or loss resulting from discontinued operations, the price
computed using the per-share earnings before discountinued item.
Ex. 12.5 a. 1.
2.
b. The earnings per share figure computed in part a (2) is a basic EPS figure. Although the company ha
ordinary and preference share, the preference share must be convertible into ordinary share in orde
diluted computation of earnings per share. The potential conversion of preference share into ordinar
necessitates disclosure of diluted EPS. Because the preference share in this exercise is not convertible
computation is basic.
GLOBAL EXPORTS
Income Statement
For the Year Ended December 31, 20__
Net sales .
Less: Costs and expenses (including income tax) .
Profit from continuing operations .
Gain on disposal of discontinued operations, net of income tax
Profit ..
Earnings per share of ordinary share:
Earnings from continuing operations ($1,550,000 910,000 shares) ..
Earnings arising from the disposal of discontinued operations ($420,000 910,000 shares)
Net earnings ($1,970,000 910,000 shares)
The $1.70 earnings per share before continuing operations is the figure used to compute the price-earnings ratio for
Global Exports. If a company reports a gain or loss resulting from discontinued operations, the price-earnings ratio is
computed using the per-share earnings before discountinued item.
The earnings per share figure computed in part a (2) is a basic EPS figure. Although the company has outstanding both
ordinary and preference share, the preference share must be convertible into ordinary share in order to result in a
diluted computation of earnings per share. The potential conversion of preference share into ordinary share is what
necessitates disclosure of diluted EPS. Because the preference share in this exercise is not convertible, the EPS
computation is basic.
$7,750,000
6,200,000
1,550,000
420,000
$1,970,000
$1.70
0.46
$2.16
price-earnings ratio for
the price-earnings ratio is
$1,920,000
400,000
$4.80
$1,920,000
800,000
$1,120,000
300,000
$3.73
Ex. 12.7 a. Apr. 30 Memorandum: Issued an additional 1,000,000 shares in a 2-for-1 share split.
Par value reduced from $1 per share to $0.50 per share.
b. 2,100,000 shares
1,000,000 + 1,000,000 + 100,000
c. $0.50 par value per share ($1 par reduced to $0.50 par due to 2-for-1 share split on April
30.)
d. Share splitNo effect
Declaration/payment of cash dividendDecrease retained earnings
Declaration/distribution of stock dividendNo effect
Ex. 12.10 a. After a share split, earnings per share are expressed in terms of the new shares.
Therefore, a 3-for-1 share split will cause earnings per share figures to be
restated at one-third of their former amounts.
d. Earnings per share are restated to reflect the increased number of shares
resulting from a stock dividend. Therefore, a stock dividend causes a
proportionate reduction in the earnings per share reported in past periods, as
well as in the current period. (This effect parallels that of a share split, only
smaller.)
h. This information may be included in the annual report, but it is not a required disclosure in
financial statements. It is reported by investors services and in the financial pages of most
newspapers.
*$290,000 x 35%
information may be included in the annual report, but it is not a required disclosure in
ncial statements. It is reported by investors services and in the financial pages of most
spapers.
enues . $572,000
enses . 282,000
it before income tax . $290,000
me tax* . 101,500
it .. $188,500
90,000 x 35%
Ex. 12.13 a. 10% stock dividend: 500,000 shares x 1.10 = 550,000 shares
2:1 share split: 550,000 x 2 = 1,100,000 shares
Note: The cash dividends do not affect the number of outstanding shares.
Your portfolio after the four transactions is $8,800 compared to $6,500 before the four transactions.
addition, you would have received cash dividends, as follows:
(100 shares x 1.10 x $1) + (110 shares x 2 x $.60) = $110 + $132 = $242
Ex. 12.14 a. adidas AG seems to be an aggressive company. It is constantly acquiring or introducing new brands
and products and making extensive promotion plan, that requires large amounts of capital. The
company retains the majority of its earnings in order to have the capital available to take advantage
its growth opportunities and to constantly introducing new brands and products for its growing
business.
b. Based on information in the Case-in-Point in this chapter, unless you have an extreme need for cash
you should probably be pleased that adidas AG retains its earnings rather than paying them to you
the form of higher dividends. The company is doing well investing its earnings, probably better than
you could do as an individual investor with the additional dividends you would receive if the compa
paid higher dividends.
ur portfolio after the four transactions is $8,800 compared to $6,500 before the four transactions. In
dition, you would have received cash dividends, as follows:
100 shares x 1.10 x $1) + (110 shares x 2 x $.60) = $110 + $132 = $242
ed on information in the Case-in-Point in this chapter, unless you have an extreme need for cash,
should probably be pleased that adidas AG retains its earnings rather than paying them to you in
form of higher dividends. The company is doing well investing its earnings, probably better than
could do as an individual investor with the additional dividends you would receive if the company
d higher dividends.
b. adidas AG seems to have one kind of share in its capital structure. 209 million
share capital had been issued. No information is available for its par value and
authorized capital. Indeed, note 26 of adidas AG (not enclosed) shows adidas'
share having no par value.
c. During the two years presented, adidas AG repurchased shares in 2007 (with a
decrease in share capital of 10 million and capital reserves of 399 million) and
issued share for the conversion of convertiable bond (with an increase in share
capital of 16 million and in capital reserves of 384 million).
_
$ 55,120,000
43,320,000
$ 11,800,000
5,820,000
$ 17,620,000
$ 11.80
5.82
$ 17.62
$ 11.80
(0.59)
$ 11.21
Net earnings
[($1,640,000 - $500,000 preference share dividends) $ 5.70
200,000 shares]
b.
Total cash dividends declared during 2009 (data given) $ 950,000
Less: Preference share dividend (80,000 shares x $6.25 per share) 500,000
Cash dividends to ordinary shareholders $ 450,000
Number of ordinary shares outstanding through 2009 200,000
Cash dividend per ordinary share ($450,000 200,000 shares) $ 2.25
c. The single 2010 $8.00 figure for EPS is unfavorable in comparison with 2009 performance.
Since 2010 has only one EPS figure, it should be compared to the earnings per share from
continuing operations in 2009, which amounted to $12.25 per share. Slick Software Limiteds
earnings per share from continuing operations fell $4.25 per share (approximately 35%) from
2009 to 2010.
b. The gain on sale of treasury share represents the excess of reissue price received over the
cost Phoenix paid to acquire some of its own share. Although a corporation may reissue
treasury share at prices above or below its cost of acquiring its own share, the difference
between amounts received and the cost of treasury shares does not result in gains or losses
recognized in the income statement. Rather, the amount described as gain on sale of
treasury share is included as part of share premium in the shareholders equity section of
the balance sheet.
Note to instructor: Profit actually increases book value throughout the year, not merely on the date
upon which profit is closed into retained earnings.
The two types of dividends do not have the same impact upon shareholders equity. A cash
dividend is a distribution of a corporations assets (cash) to shareholders and, as such,
causes a decrease in shareholders equity. A stock dividend is simply issuing more share
certificates to the existing group of shareholders with no accompanying increase or outflow
of assets; a corporations own share is not an asset of the corporation. With both small and
large share dividends, shareholders equity is adjusted to reflect the increased number of
shares outstanding, but there is no additional equity created and no decrease in equity.
2009
Jan 3 Dividends 382,000
Dividends Payable 382,000
To record declaration of $1 per share cash
dividend payable on Feb. 15 to shareholders of
record on Jan. 31
2. Payment of a cash dividend has no effect on revenue or expenses, but it reduces cash. Since it
reduces cash, it also reduces current assets. The transaction has no effect on shareholders
equity, which has already been decreased when the dividend was declared.
3. The purchase of treasury share has no effect on either revenue or expenses and,
therefore, does not affect profit. But cash is used to purchase the treasury
share, and this decreases cash and current assets. Because treasury share is
deducted from shareholders equity in the balance sheet, its purchase decreases
shareholders equity.
4. Reissuance of treasury share at a price less than its original cost results in a loss, but these
losses are not recorded in the income statement. Instead share premium is decreased for the
amount of the loss. Therefore, this transaction does not affect profit. Since the treasury share
account is deducted from shareholders equity, reissuance of the share increases the total
amount of shareholders equity. Also, both cash and current assets are increased as a result of
the cash received from sale of the share.
b.
MANDELLA CORPORATION
Partial Balance Sheet
December 31, 2009
Shareholders equity:
Share capital:
Ordinary share, $5 par, 1,000,000 shares authorized,
328,000 shares issued and outstanding (1)
Share premium:
From issuance of ordinary share $ 3,000,000
From stock dividend 350,000
From treasury share (2) 50,000
Total fully issued and paid capital
Retained earnings (3)
Total shareholders equity
$ 1,500,000
140,000
3,350,000
$ 4,990,000
450,000
$ 5,440,000
340,000
$ 5,100,000
$ 1,640,000
3,400,000
$ 5,040,000
874,000
$ 5,914,000
b.
Loss $ (18,301)
Less: Preference share dividend requirements (2,778)
Net loss applicable to ordinary shareholders (21,079)
Weighted-average number of ordinary share 39,739
Loss per share ($21,079 39,739) $ (0.53)
Subtotal $ 15,285,000
Other comprehensive income:
Loss on fair value change of available-for-sale securities $ (930,000)
Total comprehensive income, December 31, 2009 $ 14,355,000
c.
Total cash dividends declared during 2009 (data given) $ 2,000,000
Less: Preference stock dividend (100,000 shares x $6 per share) 600,000
Cash dividends to ordinary shareholders $ 1,400,000
Number of ordinary shares outstanding through 2009 200,000
Cash dividend per ordinary share ($1,400,000 200,000 shares) $ 7.00
d. The single 2010 $75.00 figure for EPS is unfavorable in comparison with 2009 performance.
Since 2010 has only one EPS figure, it should be compared to the earnings per share from
continuing operations in 2009, which amounted to $76.50 per share. Beach Limiteds
earnings per share from continuing operations fell $1.50 per share (2%) from 2009 to 2010.
c. The gain on sale of treasury share represents the excess of reissue price received over the cost
Dexter paid to acquire some of its own shares. Although a corporation may reissue treasury share at
prices above or below its cost of acquiring its own share, the difference between amounts received and
the cost of treasury shares does not result in gains or losses recognized in the income statement.
Rather, the amount described as gain on sale of treasury share is included as part of share premium
in the shareholders equity section of the balance sheet.
$ 3,268,000
80,000
$ 3,348,000
$ 110,000
$ 3,458,000
Note to instructor: Profit actually increases book value throughout the year, not merely on the date
upon which profit is closed into retained earnings.
The two types of dividends do not have the same impact upon shareholders equity. A cash
dividend is a distribution of a corporations assets (cash) to shareholders and, as such,
causes a decrease in shareholders equity. A stock dividend is simply issuing more share
certificates to the existing group of shareholders with no accompanying increase or outflow
of assets; a corporations own share is not an asset of the corporation. With both small and
large stock dividends, shareholders equity is adjusted to reflect the increased number of
shares outstanding, but there is no additional equity created and no decrease in equity as
occurs when a cash dividend is declared.
2009
Jan 5 Dividends 560,000
Dividends Payable 560,000
To record declaration of $1 per share cash
dividend payable on Feb. 18 to shareholders of
record on Jan. 31.
2. Payment of a cash dividend has no effect on revenue or expenses, but it reduces cash. Since it
reduces cash, it also reduces current assets. The transaction has no effect on shareholders
equity, which has already been decreased when the dividend was declared.
3. The purchase of treasury share has no effect on either revenue or expenses and,
therefore, does not affect profit. But cash is used to purchase the treasury
share, and this decreases cash and current assets. Because treasury share is
deducted from shareholders equity in the balance sheet, its purchase decreases
shareholders equity.
4. Reissuance of treasury share at a price less than its original cost results in a loss, but these
losses are not recorded in the income statement. Instead share premium is decreased for the
amount of the loss. Therefore, this transaction does not affect profit. Since the treasury share
account is deducted from shareholders equity, reissuance of the share increases the total
amount of shareholders equity. Also, both cash and current assets are increased as a result of
the cash received from sale of the share.
b.
ADAMS CORPORATION
Partial Balance Sheet
December 31, 2009
Shareholders equity:
Share capital:
Ordinary share, $.50 par, 200,000 shares authorized,
43,200 shares issued and outstanding (1)
Share premium:
From issuance of ordinary share $ 480,000
From stock dividend 48,000
From treasury share (2) 20,000
Total issued and fully paid capital
Retained earnings (3)
Total shareholders equity
$ 20,000
1,600
528,000
$ 549,600
800,400
$ 1,350,000
120,000
$ 1,230,000
$ 21,600
548,000
$ 569,600
1,567,200
$ 2,136,800
b.
Loss $ (16,220)
Less: Preference share dividend requirements (3,100)
Net loss applicable to ordinary shareholders $ (19,320)
Weighted-average number of ordinary share 10,000
Loss per share ($16,220 10,000) $ 1.622
a. Both the operating profit from the Indian mobile telecommunications operations and the
disposal gain should be classified in HTILs income statement as discontinued operations and
should be shown separately from the results of HTILs ongoing business operations. These
gains qualify for this separate treatment because the discontinued activities represented an
entire identifiable segment of HTILs business operations.
b. Acquisition of a new entity affect only the current year and future years, and are included in
revenues and expenses from normal operations.
c. The settlement of the court case by Cathay Pacific is classified in normal and recurring
business operations.
a. If JPL had not sold the baseball team at the end of 2009, it still would have incurred the teams
$1,300,000 operating loss for the year. However, the company would not have realized the $4,700,000
gain on the sale. Other items in the income statement would not have been affected. Thus, JPLs income
for 2009 would have been $4,700,000 less than was actually reported, or $2,600,000 ($7,300,000
$4,700,000 = $2,600,000).
b. In 2009, JPLs newspaper business earned $3,900,000, as shown by the subtotal, Profit from Continuing
Operations. If the profitability of these operations increased by 7% in 2010, they would earn
approximately $4,173,000 ($3,900,000 x 1.07 = $4,173,000). If the baseball team were still owned and lost
$2,000,000 in 2010, JPL could be expected to earn a profit of about $2,173,000 in that year.
c. Given that the baseball team was sold in 2009, JPL should earn a profit of approximately $4,173,000 in
2010, assuming that the profitability of the continuing newspaper operations increases by 7%
($3,900,000 x 1.07 = $4,173,000).
d. The operating loss incurred by the baseball team in 2009 indicates that the teams expenses (net of tax
effects) exceeded its revenue by $1,300,000. If the expenses were $32,200,000, the revenue must have
amounted to $1,300,000 less, or $30,900,000.
a. The company reports earnings per share computed on both a basic and a diluted basis because it has
outstanding convertible preference share. The conversion of these
securities into ordinary share would increase the number of ordinary shares outstanding and thereby
dilute (reduce) earnings per share of ordinary share. The primary purpose of a companys disclosing
diluted earnings per share is to warn investors of the dilution in earnings that could occur if the
convertible securities actually were converted.
It is important to recognize that diluted earnings represent a hypothetical case. The convertible
securities have not actually been converted into ordinary shares as of the close of the current year.
b. The total dollar amount of the companys loss from discontinued operations can be computed from
the earnings per share information as follows:
$3.30
$9,900,000
r share. When a companys
o shown in newspapers is
This answer appears reasonable, since the number of ordinary shares outstanding
ranged from 77,987,500 at the beginning of the year to 77,353,100 at year-end. The
77,804,878 approximate figure for the $1.23 annual dividend appears compatible with the
beginning and ending actual figures because it falls between these numbers.
c. The share issued during the year for the share option plans consisted of treasury shares, not
newly issued shares. The Treasury Share account is used to account for repurchases of a
corporations share, as well as the reissuance of treasury shares. When share is repurchased
and subsequently reissued, the Ordinary Share account is not affected; these transactions do,
however, affect the Treasury Share account, a contra- shareholders equity account.
d. $29.79 average cost per share of treasury share at the beginning of the year
($135,900,000 total cost 4,562,500 treasury shares)
e. The aggregate reissue price for the treasury shares must have been lower than the cost to
acquire those treasury shares, because the Share Premium account was reduced by the
reissuance of the treasury share. The cost of the treasury shares reissued was $16,700,000;
the reissue price for the treasury shares must have been $15,300,000 to cause a $1,400,000
reduction in Share Premium.
f. $63.61 average cost per share for treasury share acquired during the current year
($78,600,000 aggregate cost 1,235,700 shares repurchased)
g. Earnings per share: Divide by the weighted-average number of shares outstanding
throughout the year
Book value per share: Divide by the actual number of shares outstanding as of the specific
date (usually a balance sheet date)
2. Income before extraordinary items will be reduced since the losses are classified as ordinary.
3. Income from Continuing Operations will be reduced as the losses are classified as ordinary.
4. Given that these losses do not affect income taxes, they have no cash effects. Therefore, net cash
flow from operating activities will be unaffected.
d. The p/e ratio is based upon income before extraordinary items (stated on a per-share basis). As stated in
c (2), above, income before extraordinary items will be affected since the losses are classified as part of
the ordinary operations. Therefore, the p/e ratio will be higher.
e. Yes. Members of management have a self-interest in seeing share prices increase, which would favorably
affect the value of their share options as well as share they already own. In addition, a rising share price
makes it easier for the company to raise capital, benefits shareholders, and makes management look
good.
In summary, the adverse effects of these losses on the companys share price are likely
to be greater if the losses are classified as ordinary. Therefore, management has a self-interest in seeing
these losses classified as an extraordinary item.
f. These write-offs are likely to increase the earnings reported in future periods, especially if the company
continues to do business in any of the related countries. With the assets having no book value, future
earnings from these operations will not be reduced by charges for depreciation (or, in some cases, for a
cost of goods sold).
g. No ethical dilemma exists because the classification of these losses as extraordinary is not allowed.
Note to instructor: This case is adapted from an incident involving an international pharmaceutical
company. The details of the situation have been altered for the purpose of creating an introductory level
textbook assignment, and the so-called quotations from corporate officers are entirely fictitious.
Nonetheless, we believe that the outcome of the actual event provides insight into the financial reporting
process and also to the importance that investors attach to the various computations of earnings per share.
Who were the losers? Anyone who bought the share between the release of the original earnings figures and
the announcement that substantial losses would be reclassified.
The following answers are based on information from March 29, 2010 (part a.) and 2009 annual
financial statements for the remaining parts.
a. On March 29, 2010, Vodafone's share sold for a high of 151.75p and a low of 148.00p. These
amounts will vary for other dates.
b. The number of ordinary shares outstanding on Mar. 31, 2009 was 57,806,283,716. These shares
were originally sold by the company for the total of the par value of the shares plus the share
premium:
c. There is no direct relationship between the amount the share originally sold for (.82) and the
current market price of the share. The original price at which the share was sold is a historical
amount that represents the investment of owners in the company while the current market price
reflects a number of factors, including the long-term performance of the company and many
other factors directly and indirectly related to the company's performance.
d. The three-year trend in basic earnings per share (EPS), including discontinued operations, is
negative 9.7 (2007), 12.56 (2008), and 5.84 (2009). Discontinued operations did not occur in
2009 and 2008, and had the most significant impact on EPS in 2007 when it accounts for a loss of
.76 per share of a net amount of negative 9.7 of earnings per share.
e. The average number of shares used to compute basic EPS in 2009 was 52,737,00,000. This is
different from the 57,806,283,716 because the number of shares outstanding decreased during the
year. The year-end figure is in the balance sheet while a weighted average number is used in
computing EPS.