Question

As of December 31, 2020, Ahab Fisheries Inc. had the following share capital:

·       50,000 common shares                                             $200,000

·       80,000 $2, non-cumulative, preferred shares $600,000

During 2021, the following share transactions occurred:

·       April 1   Issued 10,000 common shares for cash of $ 45,000

·       July 1    Issued 20,000 common shares at $ 4.75 each

·       Dec 15 Cash dividends were declared for the preferred shares only.

For the year ending December 31, 2021, Ahab had profit of $ 323,000.

Required

a)      Calculate the profit available to common shareholders in 2021.

b)      Calculate the weighted average number of common shares in 2021.

c)      Calculate the earnings per share in 2021. (1 mark)

Answer 1

Solution: A
	CALCULATION OF PROFIT AVAILABLE TO COMMON SHAREHOLDERS
	Profit =	$                 323,000
	Less: Preferred Dividends (80,000 Shares X $ 2)	$                 160,000
	Profit Available for Common Shareholders=	$                 163,000
Solution: B
	CALCULATION OF THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
		No. of Shares		Outstanding for (Months)	Equals to	/ No. of Months	=	Outstanding Shares
1)	Beginning Shares	50000.00	X	12	600000	12	=	50000
2)	April 1 issued Shares	10000	X	9	90000	12	=	7500
3)	July 1 Issue Shares	20000.00	X	6	120000	12	=	10000
	Total Weighted Average Shares Outstanding							67500
Solution: C
	CALCULATION OF EARNIGN PER SHARES
	Profit available for Common shareholders	$                 163,000
	Divide by	"/"By
	Number of shares weighted average outstanding	67500
	Earning Per Shares	$                        2.41
	Answer = $ 2.41