Pet Boutique Corp. reported $2,952,010 of profit for 2020. On November 2, 2020, it declared and...

Pet Boutique Corp. reported $2,952,010 of profit for 2020. On November 2, 2020, it declared and paid the annual preferred dividends of $203,000. On January 1, 2020, Pet Boutique had 104,000 and 520,000 outstanding preferred and common shares, respectively. The following transactions changed the number of shares outstanding during the year: Feb. 1 Declared and issued a 20% common share dividend. Apr.30 Sold 159,000 common shares for cash. May 1 Sold 50,000 preferred shares for cash. Oct. 31 Sold 42,000 common shares for cash. a. What is the amount of profit available for distribution to the common shareholders? b. What is the weighted-average number of common shares for the year? c. What is the earnings per share for the year?

Analysis Component: Did the sale of preferred shares on May 1, 2020, affect the basic earnings per common share?

Expert Solution


a.)	Profit available for distribution to the common shareholders

	= Net Profit - Annual Preferred Dividends
	= 2,952,100 - 203,000
	= $ 2,749,100

b.)	Weighted-average number of common shares

	Date	Particulars	Number of shares	Weight	Weighted Average
	01-01-2020	Opening	104,000	12/12	104,000
	01-02-2020	Stock Dividend	20,800	12/12	20,800
	30-04-2020	Fresh Issue	159,000	8/12	106,000
	31-10-2020	Fresh Issue	42,000	2/12	7,000
	Total		325,800		237,800

c.)	Earnings per share

	Earnings per share	$11.56	(2,749,100 / 237,800 )

	Analysis Component:

	Yes, Sale of perferred shares on May 1,2020 has affected the basis earnings per share by reducing profit available for distribution to common shareholders as result of increase in number of preferred shares.







a.)	Profit available for distribution to the common shareholders

	= Net Profit - Annual Preferred Dividends
	= 2,952,100 - 203,000
	= $ 2,749,100

b.)	Weighted-average number of common shares

	Date	Particulars	Number of shares	Weight	Weighted Average
	01-01-2020	Opening	1,04,000	12/12	1,04,000
	01-02-2020	Stock Dividend	20,800	12/12	20,800
	30-04-2020	Fresh Issue	1,59,000	8/12	1,06,000
	31-10-2020	Fresh Issue	42,000	2/12	7,000
	Total		3,25,800		2,37,800

c.)	Earnings per share

	Earnings per share	11.56	(2,749,100 / 237,800 )

	Analysis Component:

	Yes, Sale of perferred shares on May 1,2020 has affected the basis earnings per share by reducing profit available for distribution to common shareholders as result of increase in number of preferred shares.

ekkarill92 answered 2 years ago

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