Analyzing and Interpreting Stockholders' Equity and EPS

Following is the stockholders' equity section of the balance sheet for The Procter & Gamble Company along with selected earnings and dividend data. For simplicity, balances for noncontrolling interests have been left out of income and shareholders' equity information.

$ millions except per share amounts	2018	2017
Net earnings attributable to Procter & Gamble shareholders	$9,750	$15,326
Common dividends	7,057	6,989
Preferred dividends	265	247
Basic net earnings per common share	$3.75	$5.80
Diluted net earnings per common share	$3.67	$5.59
Shareholders' equity:
Convertible class A preferred stock, stated value $1 per share	$967	$1,006
Common stock, stated value $1 per share (shares issued: 20184,009.2; 20174,009.2)	4,009	4,009
Additional paid-in capital	63,846	63,641
Treasury stock, at cost (shares held: 2018--1,511.2, 2017--1,455.9)	(99,217)	(93,715)
Retained earnings	98,641	96,124
Accumulated other comprehensive income/(loss)	(14,749)	(14,632)
Reserve for ESOP retirement	(1,204)	(1,249)
Shareholders' equity attributable to Procter & Gamble shareholders	$52,293	$55,184

a. Compute the number of common shares outstanding at the end of each fiscal year. Estimate the average number of shares outstanding during 2018.

Hint:To compute the 2018 Average, use the equation for Basic EPS and solve for the denominator (average common shares outstanding). Do not take an average of 2017 and 2018 shares outstanding. Note: Round to one decimal place.

2018	Answer	million
2017	Answer	million
2018 Average	Answer	million

b. Calculate the average cost per share of the shares held as treasury stock at the end of each fiscal year.Round to two decimal places.

2018	Answer
2017	Answer

c. In 2018, preferred shareholders elected to convert 4.58 million shares of preferred stock ($39 million book value)into common stock. Rather than issue new shares, the company granted 4.58 million shares held in treasury stock to the preferred shareholders, with a total cost of $33 million. Prepare a journal entry to illustrate how this transaction would have been recorded. (Hint: use the cost per share for 2018 determined in b.)Enter answers in millions. Round to the nearest million.

Description	Debit	Credit
AnswerPreferred stockTreasury stockAdditional paid-in capital	Answer	Answer
Additional paid-in capital	Answer	Answer
AnswerPreferred stockTreasury stockAdditional paid-in capital	Answer	Answer

d. Calculate P&G's return on common equity (ROCE) for fiscal 2018. Round to one decimal place.

2018

Answer

PreviousFinish review