Question

On January 1, 2018, Ivanhoe Corp. had 482,000 shares of common stock outstanding. During 2018, it had the following transactions that affected the Common Stock account.

February 1		Issued 126,000 shares
March 1		Issued a 10% stock dividend
May 1		Acquired 104,000 shares of treasury stock
June 1		Issued a 3-for-1 stock split
October 1		Reissued 61,000 shares of treasury stock

Part 1

Determine the weighted-average number of shares outstanding as of December 31, 2018.

The weighted-average number of shares outstanding

enter the weighted-average number of shares outstanding as of December 31, 2018

Part 2

Assume that Ivanhoe Corp. earned net income of $3,395,000 during 2018. In addition, it had 105,000 shares of 10%, $100 par nonconvertible, noncumulative preferred stock outstanding for the entire year. Because of liquidity considerations, however, the company did not declare and pay a preferred dividend in 2018. Compute earnings per share for 2018, using the weighted-average number of shares determined in part (a). (Round answer to 2 decimal places, e.g. $2.55.)

Part 3

Assume the same facts as in part (b), except that the preferred stock was cumulative. Compute earnings per share for 2018. (Round answer to 2 decimal places, e.g. $2.55.)

Earnings Per Share

$enter earnings per share rounded to 2 decimal places

Part 4

Assume the same facts as in part (b), except that net income included a loss from discontinued operations of $436,000 (net of tax). Compute earnings per share for 2018. (Round answer to 2 decimal places, e.g. $2.55.)

Ivanhoe Corp. Income Statement
		$enter a dollar amount per share rounded to 2 decimal places
		enter a dollar amount per share rounded to 2 decimal places
		enter a total earnings per share amount rounded to 2 decimal places

Answer 1

1) Calculation of Weighted average number of shares

	Date outstanding	No. of shares	Stock dividend restatement	Stock split restatement	Fraction of year	Weighted average shares
Beginning balance	Jan 1-Feb 1	482000	1.10	3	1/12	(482000*1.10*3*1/12)= 132550
Issued shares	Feb 1-Mar 1	(482000+126000)= 608000	1.10	3	1/12	(608000*1.10*3*1/12)= 167200
Stock dividend	Mar 1-May 1	(608000+608000*10%)= 668800	-	3	2/12	(668800*3*2/12)= 334400
Reacquired shares	May 1-June 1	(668800-104000)= 564800	-	3	1/12	(564800*3*1/12)= 141200
Stock split	June 1-Oct 1	(564800*3)= 1694400	-	-	4/12	(1694400*4/12)= 564800
Reissued shares	Oct 1-Dec 31	(1694400+61000)= 1755400	-	-	3/12	(1755400*3/12)= 438850
Weighted average number of shares						1779000

2) Earning per share= Net income/Weighted average number of shares

= $3395000/1779000= $1.91

3) Preferred dividend= 105000*$100*10%= $1050000

Earning per share= (Net income-Preferred dividend)/Weighted average number of shares

= ($3395000-1050000)/1779000= $1.32

4)

Ivanhoe Corp.
Income Statement
Income from continued operations ($3831000/1779000)		$2.15
Loss from discontinued operations (436000/1779000)		-0.25
Net income		$1.90

Income from continued operations= Net income+Loss from discontinued operations

= $3395000+436000= $3831000

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