Question

     Take‐home portion:

Assume XYZ uses a calendar year for financial reporting. The company is authorized to issue 32,500,000 shares of $1 par common stock. Listed below is a summary of XYZ’s common stock activities.

2,600,000

780,000

1,625,000

5,005,000

1-Number of common shares issued and outstanding at December 31, 2014

2-Shares issued as a result of a 30% stock dividend on Sept. 1, 2015

3-Shares issued for cash on June 30, 2016

Number of common shares issued and outstanding at December 31, 2016

4-A 2-for-1 stock split of XYZ’s common stock took place on Oct. 1, 2017

               

                                                               

Instructions:

A)Compute the weighted average number of common shares to be used in computing earnings per common share for 2015 on the 2016 comparative income statement.

B) Compute the weighted average number of common shares to be used in computing earnings per common share for 2016 on the 2016 comparative income statement.

Compute the weighted average number of common shares to be used in computing earnings per common share for 2016 on the 2017 comparative income statement.         

             

Compute the weighted average number of common shares to be used in computing earnings per common share for 2017 on the 2017 comparative income statement.

Answer 1

a	Compute the weighted average number of common shares to be used in computing earnings per common share for 2015 on the 2016 comparative income statement
	Jan 1, 2015 to Dec 31, 2015			2600000	(2600000*8)/12
	Adjustment for stock dividend			130%
	Jan 1, 2015 to Dec 31, 2015, after adjustment			3380000
	Weighted Average shares outstanding			3380000
b	Compute the weighted average number of common shares to be used in computing earnings per common share for 2016 on the 2016 comparative income statement
	Jan 1, 2016 - May 31, 2016			1408333.3	(3380000*5/12)
	Jun 1, 2016 - Dec 31, 2016			947916.67	(1625000*7/12)
	Weighted Average shares outstanding			2356250
c	Compute the weighted average number of common shares to be used in computing earnings per common share for 2016 on the 2017 comparative income statement
	2016 weighted average number of shares			2356250
	Adjustment for stock split			2
	Weighted Average shares outstanding			4712500
d	Compute the weighted average number of common shares to be used in computing earnings per common share for 2017 on the 2017 comparative income statement
	Jan 1, 2017 to Sept 30, 2017			947916.67
	Adjustment for stock split			2
	Jan 1, 2016 to Sept 30, 2016, as adjusted			1895833.33	9
	Oct 1, 2017 to Dec 31, 2017			631944.44
	Weighted Average shares outstanding			2527777.78	12