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shermah · Jun 3, 2008, 04:49 PM

Does anyone know how to calculate earnings per share part of the multi-step income statement... To be exact...

Per share of common stock
Income from continuing operations??
Income from discontinued operation, net of tax??
Income before extraodinary item??
Extraordinary gain, net of tax??
Net income??

Can somebody help? Thank you so much.

morgaine300 · Jun 3, 2008, 07:53 PM

Basic earnings per share:

$\frac{Earnings\, -\, preferred\, dividends}<br /> {number\, of\, outstanding\, common\, shares}$

However, you need to learn how to get this set up in your income statement correctly first. There are no earnings per share on things like "income before extraordinary gain" because it's just a sub-total. You only have 2 below-line items, but I'll use all 3 for an example, since you could run across them all.

This would be the basic set up of the numbers.

900,000 Income from Continuing Operations
(200,000) Loss on Discontinued Operations
700,000 Income before Extraordinary Gain
100,000 Extraordinary Gain
800,000 Income before Cummulative Affect of Accounting Change
(50,000) Cumulative Affect of Change in Accounting Principles
750,000 Net Income

The two purple ones are just sub-totals and don't have EPS. This is how it's set up, but let's throw out the sub-totals and just look at what we've really got to work with:

900,000
(200,000)
100,000
(50,000)
750,000

Those four numbers make up your bottom-line net income: continuing operations and 3 below-line items. Without delving into why's, only take preferred dividends out for the continuing operations and the bottom-line net income. For the below-line items, it's just that number/outstanding common shares -- no subtracting of preferred dividends.

This is assuming you have preferred dividends. Since you've presented no information about the make up of the stock, I can't tell you about that part.

Ignore the net of tax. It's the net number you're concerned with. (i.e. if you have 200,000 net of 70,000 tax, which nets to 130,000 -- it's the 130,000 you want.)

Give this a try and see how it goes. You can always submit whatever you come up with and someone can check it for you. But you'll need to submit all the necessary information.