The amount of net income belonging to a single share of stock is called earnings per share (EPS). EPS is shown on the income statement. In some cases, the company must calculate EPS. two different ways. The formula for “basic” EPS is:

EPS = Net Income/Number of Shares Outstanding 

The formula for "diluted" or "fully diluted" EPS is more complicated and can use different numbers for both the numerator and the denominator.

Instructions:

1. Using Appendix B in this textbook, go to the income statement for Costco Corporation on page B-7. What is the basic EPS for the 53 weeks ended September 3, 2006?

2. Show the formula and amounts used to calculate the EPS for the period ending September 3, 2006.

3. Compare the basic EPS for the three years shown on the income statement. What trend can you identify?

Data from Appendix b page 7

Transcribed Image Text:

REVENUE Net sales Membership fees.. Total revenue COSTCO WHOLESALE CORPORATION CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except per share data) 53 weeks ended September 3, 2006 52 weeks ended August 28, 2005 52 weeks ended August 29, 2004 OPERATING EXPENSES Merchandise costs Selling, general and administrative Preopening expenses..... Provision for impaired assets and closing costs, net Operating income OTHER INCOME (EXPENSE) Interest expense..... Interest income and other INCOME BEFORE INCOME TAXES Provision for income taxes NET INCOME $58,963,180 $51,879,070 $47,148,627 1,188,047 1,073,156 961,280 60,151,227 52,952,226 48,109,907 52,745,497 46,346,961 42,092,016 5,732,141 5,061,339 4,600,792 42,504 53,230 30,451 5,453 16,393 1,000 1,625,632 1,474,303 1,385,648 (12,570) (34,437) (36,651) 138,355 109,096 51,627 1,751,417 1,548,962 1,400,624 648,202 485,870 518,231 $ 1,103,215 $ 1,063,092 $ 882,393