Question

On January 1, 2021, Shamu Corporation had 100,000 shares of common stock outstanding. The following transactions occurred during 2021:

March		1:		Reacquired 2,300 shares, accounted for as treasury stock.
September		30:		Sold all the treasury shares.
December		1:		Sold 11,300 new shares for cash.
December		31:		Reported a net income of $191,500.

The following transactions occurred during 2022:

January		10:		Declared and issued a 30% stock dividend.
December		31:		Reported a net income of $261,800.

Required:
Calculate Shamu's basic earnings per share for both years for presentation in comparative financial statements that will be prepared at the end of 2022. (Round your answers to 2 decimal places.)

	Earnings per share 2021 2022

Answer 1

Earnings per share:

2021 - $1.72

2022 - $1.81

Working notes:

	2021
Number of outstanding common shares at the beginning of 2021	100,000
Less: Treasury shares on March 1	-2,300
Add: Sale of treasury shares on Sep. 1	2,300
Add: Sale of new shares on Dec. 1	11,300
Total outstanding shares at the end of 2021 (a)	111,300
Net income in 2021	$191,500
Less: Preferred dividends in 2021	$0
Earnings available to the common shareholders (b)	$191,500
Earnings per share in 2021 (b/a)	$1.72
	2022
Number of outstanding common shares at the beginning of 2022	111,300
Add: Stock dividends on Jan. 10 (111,300*30/100)	33,390
Total outstanding shares at the end of 2022 (c )	144,690
Net income in 2022	$261,800
Less: Preferred dividends in 2021	$0
Earnings available to the common shareholders (d)	$261,800
Earnings per share in 2022 (b/a)	$1.81