Question

You have been provided with accounting research tools. Use them to answer the following multiple choice questions. After you make your choice, tell me what theory you are basing your answer on, or what part of the codification applies to the question (explain). As you may have guessed, this is an open book quiz.

Smith Corporation had net income for the year of $101,504 and a simple capital structure consisting of the following common shares outstanding:

Months Outstanding = Number of shares

January - February = 24,000

March - June = 29,400

July - November = 36,000

December = 35,040

Total = 124.440

Also assume that Smith Corporation issued a 20% stock dividend on August 1. This distribution is not reflected in the data above. Accordingly, BEPS (rounded to the nearest cent) equals

A. $2.41

B. $2.67

C. $2.72

D. $2.88

Answer 1

Calculation of Weighted average no. of shares outstanding:-
Period	No. of shares	Weight	Weighted average
January-February	24,000	2/12	4,000
March-June	29,400	4/12	9,800
Stock Dividend-August 1	5,880	12/12	5,880
July-November (36,000 - 5,880 )	30,120	5/12	12,550
December	35,040	1/12	2,920
Total	124,440		35,150
Basis earning per share	$ 2.88	( 101,504 / 35,150 )
Correct answer is option D. (i.e. $ 2.88 )