In: Accounting
On January 1, 2018, Buffalo Corp. had 488,000 shares of common stock outstanding. During 2018, it had the following transactions that affected the Common Stock account. February 1 Issued 115,000 shares March 1 Issued a 10% stock dividend May 1 Acquired 96,000 shares of treasury stock June 1 Issued a 3-for-1 stock split October 1 Reissued 61,000 shares of treasury stock
a.Determine the weighted-average number of shares outstanding as of December 31, 2018.
b.Assume that Buffalo Corp. earned net income of $3,330,000 during 2018. In addition, it had 105,000 shares of 9%, $100 par nonconvertible, noncumulative preferred stock outstanding for the entire year. Because of liquidity considerations, however, the company did not declare and pay a preferred dividend in 2018. Compute earnings per share for 2018, using the weighted-average number of shares determined in part (a).
c.Assume the same facts as in part (b), except that the preferred stock was cumulative. Compute earnings per share for 2018.
a |
Computation of weighted average number of shares outstanding as dec 2018 |
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Particulars |
Dates |
Outstanding shares |
working |
Stock dividend restatement |
Stock split restatement |
Number of months |
12 months |
Weighted shares |
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Beginning Balance |
Jan1 - Feb 1 |
488000 |
Given |
1.1 |
3 |
1 |
12 |
134200 |
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Issued shares |
Feb1 - Mar 1 |
603000 |
488000+115000 |
1.1 |
3 |
1 |
12 |
165825 |
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stock dividend |
Mar1 - May 1 |
663300 |
603000*1.1 |
3 |
2 |
12 |
331650 |
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Reacquired shares |
May 1 - June 1 |
567300 |
663300-96000 |
3 |
1 |
12 |
141825 |
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Stock split |
June 1 - oct 1 |
1701900 |
567300*3 |
4 |
12 |
567300 |
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Reissued shares |
Oct 1 - Dec 31 |
1762900 |
1701900+61000 |
3 |
12 |
440725 |
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Weighted number of shares outstanding |
1781525 |
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b |
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Basic Earnings per share: |
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[Netincome - Preferred dividends]/Weighted average number of shares outstanding |
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$3330000/1781525 |
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1.869185108 |
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$1.87 |
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c |
Assume the same facts as in part (b) except preferred stock is cummulative |
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Basic Earnings per share: |
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[Netincome - Preferred dividends]/Weighted average number of shares outstanding |
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[$3330000-$945000]/1781525 |
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1.338741 |
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$1.34 |
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