Question

1. On January 1, 2020, Blossom Ltd. had 498,000 common shares outstanding. During 2020, it had the following transactions that affected the common share account:

Feb. 1		Issued 150,000 shares.
Mar. 1		Issued a 10% stock dividend.
May 1		Acquired 162,000 common shares and retired them.
June 1		Issued a 2-for-1 stock split.
Oct. 1		Issued 40,000 shares.

The company’s year end is December 31.Determine the weighted average number of shares outstanding as at December 31, 2020. (Round answer to 0 decimal places, e.g. 5,275.)

Weighted average number of shares outstanding

enter the Weighted average number of shares outstanding rounded to 0 decimal places shares

Assume that Blossom earned net income of $3,000,000 during 2020. In addition, it had 80,000 of 7%, $100 par, non-convertible, non–cumulative preferred shares outstanding for the entire year. Because of liquidity limitations, however, the company did not declare and pay a preferred dividend in 2020.

Calculate earnings per share for 2020, using the weighted average number of shares determined above. (Round answer to 2 decimal places, e.g. 15.25.)

Earnings per share

$enter Earnings per share in dollars rounded to 2 decimal places

Assume that Blossom earned net income of $3,000,000 during 2020. In addition, it had 80,000 of 7%, $100 par, non-convertible, non–cumulative preferred shares outstanding for the entire year. Because of liquidity limitations, however, the company did not declare and pay a preferred dividend in 2020. Assume that net income included a loss from discontinued operations of $400,000, net of applicable income taxes.

Calculate earnings per share for 2020. (Round answers to 2 decimal places, e.g. 15.25.)

		Earnings per share
Income from continuing operations		$enter a dollar amount rounded to 2 decimal places
Loss from discontinued operations		$enter a dollar amount rounded to 2 decimal places
Net income		$enter a total amount rounded to 2 decimal places

Answer 1

Solution a:

Computation of weighted average outstanding shares
	Number of shares	Stock Dividend Restatement	Stock Split Restatement	No. of months	Total Months	Weighted-average shares
Shares outstanding	498,000	1.1	2	1	12	91,300
Issued Shares	648,000 (498,000+150,000)	1.1	2	1	12	118,800
Stock Dividend	712,800 (648,000*1.1)		2	2	12	237,600
Reacquired Shares	550,800 (712,800-162,000)		2	1	12	91,800
2-for-1 stock split	1,101,600 (550,800*2)			4	12	367,200
Reissued shares	1,141,600 (1,101,600+40,000)			3	12	285,400
Total weighted average number of shares outstanding						1,192,100

b)

Earnings per share = Net income / weighted average number of shares outstanding = $3,000,000 / 1,192,100 = $2.52

c)

Net Income	$3,000,000
Add: Loss from Discontinued Operations	$400,000
Income from continued operations	$3,400,000

Income Statement
For the Year ended Dec 31, 2020
Income from continued operations ($3,400,000/1,192,100)	$2.85
Loss from Discontinued Operations ($400,000/ 1,192,100)	-$0.33
Net Income ($3,000,000/1,192,100)	$2.52

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