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In: Accounting

You have been provided with accounting research tools. Use them to answer the following multiple choice...

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

Solutions

Expert Solution

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 )

ekkarill92 answered 2 years ago
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