1. Chapter 14 Investasi dalam Saham Accounting, 21st Edition
Warren Reeve Fess
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PowerPoint Presentation by Douglas Cloud Professor Emeritus of Accounting Pepperdine University

2. Laba per saham biasa

3. Laba Per Saham Biasa
Earnings per share (EPS) is the net income per share of common stock outstanding. When unusual items exist, EPS should be reported for:
Income from continuing operations
Income before extraordinary items and the cumulative effect of a change in accounting principle
Extraordinary items and the cumulative effect of a change in accounting principle
Net income

4. Earnings per Common Share
If there is no preferred stock:
Earnings per common share =
Net Income
Number of common shares outstanding
If there is preferred stock:
Earnings per common share =
Net Income – Preferred stock dividends
Number of common shares outstanding

5. Jones Corporation Income Statement For the Year Ended December 31, 2006
Income from continuing operations $690,000
Net income $832,000
Earnings per common share:
Income from continuing operations $ 3.45
Loss on discontinued operations (Note B)
Income before extraordinary item and cumulative
effect of a change in accounting principle $2.95
Extraordinary item .75
Cumulative effect on prior years of changing
to a different depreciation method
Net income $ 4.16

6. Jones Corporation Income Statement For the Year Ended December 31, 2006
Income from continuing operations $690,000
Net income $832,000
Earnings per common share:
Income from continuing operations $ 3.45
Loss on discontinued operations (Note B)
Income before extraordinary item and cumulative
effect of a change in accounting principle $2.95
Extraordinary item .75
Cumulative effect on prior years of changing
to a different depreciation method
Net income $ 4.16

7. Jones Corporation Income Statement For the Year Ended December 31, 2006
Income from continuing operations $690,000
Net income $832,000
Earnings per common share:
Income from continuing operations $ 3.45
Loss on discontinued operations (Note B)
Income before extraordinary item and cumulative
effect of a change in accounting principle $2.95
Extraordinary item .75
Cumulative effect on prior years of changing
to a different depreciation method
Net income $ 4.16

8. Jones Corporation Income Statement For the Year Ended December 31, 2006
Income from continuing operations $690,000
Net income $832,000
Earnings per common share:
Income from continuing operations $ 3.45
Loss on discontinued operations (Note B)
Income before extraordinary item and cumulative
effect of a change in accounting principle $2.95
Extraordinary item .75
Cumulative effect on prior years of changing
to a different depreciation method
Net income $ 4.16

9. Jones Corporation Income Statement For the Year Ended December 31, 2006
Income from continuing operations $690,000
Net income $832,000
Earnings per common share:
Income from continuing operations $ 3.45
Loss on discontinued operations (Note B)
Income before extraordinary item and cumulative
effect of a change in accounting principle $2.95
Extraordinary item .75
Cumulative effect on prior years of changing
to a different depreciation method
Net income $ 4.16

10. Comprehensive Income
Companies may report comprehensive income on the income statement, in a separate statement, or in the statement of stockholders’ equity.

11. Comprehensive Income
However, comprehensive income does not include changes caused by issuing dividends or from stockholders’ investments.
Comprehensive income is defined as all changes in stockholders’ equity during a period.

12. Stockholders’ Equity Section
Common stock $ 20,000 $ 20,000
Paid-in capital in excess of par 36,000 36,000
Retained earnings 165, ,000
Accumulated other
comprehensive income , ,200
Total stockholders’ equity $222,790 $214,200

13. Accounting for Investments in Stocks
Trading securities are securities that management intends to actively trade for profit.
Available-for-sale securities are securities that management expects to sell in the future, but which are not actively traded for profit.

14. Short-Term Investments in Stocks
Temporary investments are recorded in the current asset account, Marketable Securities, at their cost.

15. Short-Term Investments in Stocks
On June 1, Crabtree Company purchased 2,000 shares of Inis Corporation common stock at $89.75 per share plus a brokerage fee of $500.
$89.75 x 2,000 shares + $500
June 1 Marketable Securities
Cash
Purchased 2,000 shares of Inis Corporation common stock.

16. Short-Term Investments in Stocks
On October 1, Inis declared a $0.90 per share dividend payable on November 30.
2,000 shares x $0.90
Nov. 30 Cash
Dividend Revenue
Received dividend on Inis Corporation common stock.

17. Short-Term Investments in Stocks
On the balance sheet, temporary investments are reported at their fair market value. Any difference between the fair market value and the cost is an unrealized holding gain or loss.

18. Short-Term Investments in Stocks
At year-end, the total cost of Crabtree Co.’s four temporary investments is $690,000. The current market for these four items totaled $750,000 at year-end. Thus, Crabtree Co. had a before tax unrealized gain of $60,000.

19. Short-Term Investments in Stocks
Crabtree Co.
Balance Sheet
December 31, 2006
Current assets:
Cash $119,500
Temporary investments in
marketable securities at cost $690,000
Plus unrealized gain (net of
applicable income tax of
$18,000) , ,000
Stockholders’ Equity
Accumulated other comprehensive income 42,000

20. Statement of Comprehensive Income For the Year Ended December 31, 2006
Short-Term Investments in Stocks
Crabtree Co.
Statement of Comprehensive Income
For the Year Ended December 31, 2006
Net income $720,000
Other comprehensive income:
Unrealized gain on temporary investments
in marketable securities (net of
applicable tax of $18,000) ,000
Comprehensive income $762,000

21. Long-Term Investments in Stocks
Long-term investments are those investments made by a firm that are not intended as a source of cash in the normal operations of the business.

22. Long-Term Investments in Stocks
Ownership %
100%
Controlling Interest
With less than 20% ownership the buyer does not usually have significant influence. The buyer uses the cost method to account for the investment.
Equity
Method
50%
Significant
influence
Cost
Method
Not significant
influence
20%
Cost
Method
Not significant
influence 0%

23. Long-Term Investments in Stocks
Ownership %
100%
Equity
Method
Ownership over 20% usually indicates significant influence. The buyer uses the equity method to account for the investment.
Controlling Interest
Equity
Method
50%
Significant
influence
20%
Cost
Method
No significant
influence 0%

24. Long-Term Investments in Stocks
On January 2, Hally Inc. pays cash of $350,000 for 40% of Brock Corporation’s common stock.
Jan. 2 Investment in Brock Corp. Stock
Cash
Purchased 40% of Brock Corp. common stock.

25. Long-Term Investments in Stocks
For the year ending December 31, Brock Corporation reports net income of $105,000.
Dec Investment in Brock Corp. Stock
Income of Brock Corp
Recorded share (40%) of Brock Corp. net income of $105,000.

26. Long-Term Investments in Stocks
On December 31, Brock Corporation declared a $45,000 dividend, payable on December 31.
Dec Cash
Investment in Brock Crop. Stock
Recorded share (40%) of dividends of $45,000 paid by Brock Corp.

27. Long-Term Investments in Stocks
On March 1, an investment in Drey Inc. stock that had a carrying amount of $15,700 is sold for $17,500.
Mar Cash
Investment in Drey Inc. Stock
Gain on Sale of Investments
Sold investment in Drey Inc. stock.

28. Business Combinations
Equity
Method
Cost
No significant
influence
Significant
Ownership % 0%
20%
Controlling Interest
100%
50%
The corporation owning all or a majority of the voting stock is called the parent company. The controlled corporation is the subsidiary company. Consolidated financial statements are prepared which combines the operating results of the two entities.

29. Business Combinations
A merger combines two corporations by one acquiring the properties of another that is then dissolved.
Many businesses combine in order to produce more efficiently or to diversify product lines.
A consolidation is the creation of a new corporation, to which the combined assets and liabilities of the old corporations are transferred to the new corporation.

30. Business Combinations
Mergers
Consolidations C A B A B
Mergers: Company A acquires company B. The assets and liabilities of B are transferred to A and B is then dissolved.
Consolidations: Company A acquires company B. The assets and liabilities of both A and B are transferred to a new company C and A and B are then dissolved.

31. FINANCIAL ANALYSIS AND INTERPRETATION
A firm’s growth potential and future earnings prospects are indicated by how much the market is willing to pay per dollar of a company’s earnings.

32. Price-Earnings Ratio Accounting: Earnings Per Share
Net Income
Common Shares
Earnings per Share of Common Stock =
Investing: Price - Earnings Ratio
Market Price Per Share
of Common Stock
Earnings Per Share of
Common Stock
Price-
Earnings
Ratio =

33. Price-Earnings Ratio
The price-earnings ratio represents how much the market is willing to pay per dollar of a company’s earnings. This indicates the market’s assessment of a firm’s growth potential and future earnings prospects.
An example:
Market price per share $20.50 $13.50
Earnings per share $ $1.35
Price-earnings ratio
The price-earnings ratio indicates that a share of common stock was selling for 10 times earnings for 2005 and 12.5 times for 2006.

34. Chapter 14
The End