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Question: Esau Inc. presented the following data: /

Esau Inc. presented the following data:
Esau Inc. presented the following data:

As at January 1, 2020, there were no dividends in arrears. On December 31, 2020, Esau declared and paid the preferred dividend for 2020. 

Instructions 
a. Calculate earnings per share for the year ended December 31, 2020. Round to the nearest cent. 
b. Discuss what the effect would be on your calculation in part (a) if the stock split had been declared on January 30, 2021, instead of on October 1, 2020, assuming the financial statements of Esau Inc. for the year ended December 31, 2020, were issued after January 30, 2021. 
c. Assume that Esau did not declare or pay a preferred dividend in 2020. Calculate earnings per share for the year ended December 31, 2020. Round to the nearest cent. 
d. Assume that as at January 1, 2020, Esau had two years of dividends in arrears, and that on December 31, 2020, Esau declared and paid the dividends in arrears and the preferred dividend for 2020. Calculate earnings per share for the year ended December 31, 2020. Round to the nearest cent. 
e. Assume that the preferred shares are non-cumulative, and that the preferred dividend was paid in 2020. Calculate earnings per share for the year ended December 31, 2020. Round to the nearest cent. 
f. Assume that the preferred shares are non-cumulative, and that Esau did not declare or pay a preferred dividend in 2020. Calculate earnings per share for the year ended December 31, 2020. Round to the nearest cent. 
g. Discuss the effect of a stock split on Esau Inc.'s market price per share. Would a current shareholder favour Esau Inc.'s declaration of a stock split?

As at January 1, 2020, there were no dividends in arrears. On December 31, 2020, Esau declared and paid the preferred dividend for 2020. Instructions a. Calculate earnings per share for the year ended December 31, 2020. Round to the nearest cent. b. Discuss what the effect would be on your calculation in part (a) if the stock split had been declared on January 30, 2021, instead of on October 1, 2020, assuming the financial statements of Esau Inc. for the year ended December 31, 2020, were issued after January 30, 2021. c. Assume that Esau did not declare or pay a preferred dividend in 2020. Calculate earnings per share for the year ended December 31, 2020. Round to the nearest cent. d. Assume that as at January 1, 2020, Esau had two years of dividends in arrears, and that on December 31, 2020, Esau declared and paid the dividends in arrears and the preferred dividend for 2020. Calculate earnings per share for the year ended December 31, 2020. Round to the nearest cent. e. Assume that the preferred shares are non-cumulative, and that the preferred dividend was paid in 2020. Calculate earnings per share for the year ended December 31, 2020. Round to the nearest cent. f. Assume that the preferred shares are non-cumulative, and that Esau did not declare or pay a preferred dividend in 2020. Calculate earnings per share for the year ended December 31, 2020. Round to the nearest cent. g. Discuss the effect of a stock split on Esau Inc.'s market price per share. Would a current shareholder favour Esau Inc.'s declaration of a stock split?





Transcribed Image Text:

Net Income $5,500,000 Preferred shares: 50,000 shares outstanding, $100 par, 8% cumulative, not convertible Common shares: Shares outstanding, Jan. 1, 2020 $5,000,000 650,000 Issued for cash, May 1, 2020 Acquired treasury shares for cash, Sept. 1, 2020 (shares cancelled) 100,000 150,000 2-for-1 stock split, Oct. 1, 2020


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3.99

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