Question

Marin Inc. uses a calendar year for financial reporting. The company is authorized to issue 8,610,000 shares of $10 par common stock. At no time has Marin issued any potentially dilutive securities. Listed below is a summary of Marin’s common stock activities.

1.		Number of common shares issued and outstanding at December 31, 2018		1,920,000
2.		Shares issued as a result of a 10% stock dividend on September 30, 2019		192,000
3.		Shares issued for cash on March 31, 2020		2,060,000
		Number of common shares issued and outstanding at December 31, 2020		4,172,000
4.		A 2-for-1 stock split of Marin’s common stock took place on March 31, 2021

Compute the weighted-average number of common shares used in computing earnings per common share for 2019 on the 2020 comparative income statement.

shares

eTextbook and Media

  

  

Compute the weighted-average number of common shares used in computing earnings per common share for 2020 on the 2020 comparative income statement.

shares

eTextbook and Media

  

  

Compute the weighted-average number of common shares to be used in computing earnings per common share for 2020 on the 2021 comparative income statement.

shares

eTextbook and Media

  

  

Compute the weighted-average number of common shares to be used in computing earnings per common share for 2021 on the 2021 comparative income statement.

shares

Answer 1

Solution A:

Weighted average number of common shares to be used in computing earnings per common share for 2019 on the 2020 comparative income statement =

Outstanding shares at beginning of 2019 restated with stock dividend regardless of where in the year the stock dividends occurs

= 1920000*110% = 2112000 shares

Solution B:

Weighted average number of common shares to be used in computing earnings per common share for 2020 on the 2020 comparative income statement:

Outstanding shares at beginning of 2020 + Weighted average nos of shares issued during the year

= 2112000 + 2060000*9/12 = 3657000 shares

Solution C:

Weighted average number of common shares to be used in computing earnings per common share for 2020 on the 2021 comparative income statement.

= 2020 weighted average nos of share outstanding * retrospective adjustment of stock split

= 3657000 * 2 = 7314000 shares

Solution D:

Weighted average number of common shares to be used in computing earnings per common share for 2021 on the 2021 comparative income statement:

Nos of outstanding shares at beginning of 2021 * retrospective adjustment of stock split

= 4172000*2 = 8344000 shares