Question

1. At January 1, Strunk Corp. had 1,200,000 common shares outstanding. Strunk issued 240,000 additional common shares on March 1 and 180,000 more on June 1. On November 1, Strunk repurchased 60,000 common shares as treasury stock. For purposes of basic earnings per share, the weighted average shares outstanding for the year is

   		1,090,000 shares
   		1,190,000 shares
   		1,380,000 shares
   		1,560,000 shares
   		None of the above

2. Davies Inc. had 1,400,000 outstanding shares of common stock at the beginning of the current year (January 1). On October 1, Davies issued 600,000 additional common shares. Davies also had outstanding for the entire year 12,000 shares of 5% preferred stock with a par value of $80 per share. Accordingly, Davies declared and paid $48,000 of dividends to preferred shareholders during the year. Davies had net income for the year of $2,000,000. Basic earnings per share for the year is

		$0.98 per share
		$1.00 per share
		$1.29 per share
		$1.30 per share
		$1.43 per share
		None of the above

Answer 1

• Answer #1
  Correct Answer = None of the Above

Weighted Average no. of shares
Jan-01	1,200,000	1200000*12/12
Mar-01	200,000	240000*10/12
Jun-01	105,000	180000*7/12
Nov-01	(10,000)	(60000)*2/12
Total No. of weighted Average no. of shares	1,495,000

• Answer #2

Correct Answer = None of the above

A	Net Income	$2,000,000
B	Preferred stock dividend	$48,000
C = A - B	Net Income for common stockholder's	$1,952,000
D	Total No. of weighted Average no. of shares	1,550,000
E = C/D	Earnings per share	1.26

Weighted Average no. of shares
Jan-01	1,400,000	1400000 shares x 12/12
Oct-01	150,000	600000 shares x 3/12
Total No. of weighted Average no. of shares	1,550,000