Question

Problem 16-06 (Part Level Submission) Riverbed Corporation is preparing the comparative financial statements for the annual report to its shareholders for fiscal years ended May 31, 2020, and May 31, 2021. The income from operations for the fiscal year ended May 31, 2020, was $1,827,000 and income from continuing operations for the fiscal year ended May 31, 2021, was $2,536,000. In both years, the company incurred a 10% interest expense on $2,376,000 of debt, an obligation that requires interest-only payments for 5 years. The company experienced a loss from discontinued operations of $585,000 on February 2021. The company uses a 20% effective tax rate for income taxes. The capital structure of Riverbed Corporation on June 1, 2019, consisted of 1,018,000 shares of common stock outstanding and 19,200 shares of $50 par value, 7%, cumulative preferred stock. There were no preferred dividends in arrears, and the company had not issued any convertible securities, options, or warrants. On October 1, 2019, Riverbed sold an additional 507,000 shares of the common stock at $20 per share. Riverbed distributed a 20% stock dividend on the common shares outstanding on January 1, 2020. On December 1, 2020, Riverbed was able to sell an additional 817,000 shares of the common stock at $22 per share. These were the only common stock transactions that occurred during the two fiscal years.

Determine the weighted-average number of shares that Riverbed Corporation would use in calculating earnings per share for the fiscal year ended:

				Weighted-average number of shares
(1)		May 31, 2020
(2)		May 31, 2021

Answer 1

Answer (1) Weighted-average number of shares as on May 31, 2020 :-

Vesting dates	Particulars	Transactions	Total Shares outstanding	Days Outstanding	No. of days in a year	%	Weighted Average Shares
June 1, 2019	Opening Shares		1,037,200	122	366	33%	345,733
October 1, 2019	Issue of Shares	507,000	1,544,200	92	366	25%	388,160
January 1, 2020	Stock Dividend	305,000	1,849,200	152	366	42%	767,974
May 31, 2020	Closing Shares		1,849,200			100%	1,501,867

Answer (2) Weighted-average number of shares as on May 31, 2021 :-

Vesting dates	Particulars	Transactions	Total Shares outstanding	Days Outstanding	No. of days in a year	%	Weighted Average Shares
June 1, 2020	Opening Shares		1,849,200	183	365	50%	927,133
December 1, 2020	Sale of Shares	(817,000)	1,032,200	182	365	50%	514,686
May 31, 2021	Closing Shares		1,032,200			100%	1,441,819