Problem Library

Ubbes Company: Earnings Per Share

Length: 1-3 Hours

Discipline: Accounting

Level: Intermediate (majors)

Author: Cottell, Philip

Having worked through the six phases of the Ubbes Company unfolding PBL problem, students will have learned the complexities of computing and reporting the earnings per share ratio. The problem leads students into an understanding of calculating the weighted average number of shares outstanding when a company has experienced several changes to owners’ equity during the period. They then review how to compute preferred dividends and the treatment thereof in the numerator of basic earnings per share. Once they have calculated basic earnings per share, students learn about the adjustments to the numerator and the denominator required for diluted earnings per share. They first encounter convertible securities, then options. Tests for anti-dilution have been incorporated into the problem. In the final phase, students learn the reporting of earnings per share when items below the line have occurred.

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