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

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

Expert Solution

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

ekkarill92 answered 2 years ago

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