Question

On January 1, 2018, Skysong Corp. had 469,000 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 101,000 shares of treasury stock
June 1		Issued a 3-for-1 stock split
October 1		Reissued 62,000 shares of treasury stocks

Determine the weighted-average number of shares outstanding as of December 31, 2018.

The weighted-average number of shares outstanding

enter the weighted-average number of shares outstanding as of December 31, 2018

Assume that Skysong Corp. earned net income of $3,354,000 during 2018. In addition, it had 101,000 shares of 8%, $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). (Round answer to 2 decimal places, e.g. $2.55.)

Earnings Per Share

$enter earnings per share rounded to 2 decimal places

Assume the same facts as in part (b), except that the preferred stock was cumulative. Compute earnings per share for 2018. (Round answer to 2 decimal places, e.g. $2.55.)

Earnings Per Share

$enter earnings per share rounded to 2 decimal places

Assume the same facts as in part (b), except that net income included a loss from discontinued operations of $418,000 (net of tax). Compute earnings per share for 2018. (Round answer to 2 decimal places, e.g. $2.55.)

Answer 1

Date	Event	Calculation	Shares
01-Jan	-		469,000
01-Feb	Issued 115,000 shares	=469,000+115,000	584,000
01-Mar	Issued 10% stock dividend	=584,000*(1+10%)	642,400
01-May	Acquired 101,000 shares of treasury stock	=642,400 - 101,000	541,400
01-Jun	3 for 1 stock split	=3*541,400	1,624,200
01-Oct	Reissued 62,000 treasury stocks	=1,624,200 + 62,000	1,686,200

Formula	A	B		C	(A*B*C)
Time duration	Shares outstanding	Restatement (Stock dividend restatement*stock split restatement)	Number of months (n)	Fraction of year (n/12)	Weighted shares
1 Jan - 1 1Feb	469,000	3.3	1	0.08	128,975
1 Feb - 1 Mar	584,000	3.3	1	0.08	160,600
1 Mar - 1 May	642,400	3	2	0.17	321,200
1 May - 1 Jun	541,400	3	1	0.08	135,350
1 Jun - 1 Oct	1,624,200		4	0.33	541,400
1 Oct - 31 Dec	1,686,200		3	0.25	421,550
				Total	1,709,075

a). Weighted average shares as of December 31, 2018 = 1,709,075

b). EPS = (Net income - preferred dividends)/Weighted average shares

Since preferred dividends are noncumulative and were not declared this year, it is taken as zero.

EPS = (3,354,000 -0)/1,709,075 = 1.96

c). If preferred dividend is cumulative then dividend paid will be dividend rate*par value*number of preferred shares

= 8%*100*101,000 = 808,000

EPS = (3,354,000 - 808,000)/1,709,075 = 1.49

d). Net income = 3,354,000 - loss from discontinued operations

= 3,354,000 - 418,000 = 2,936,000

EPS = 2,936,000/1,709,075 = 1.72