Ace Company had 200,000 shares of common stock outstanding on December 31, 2008. During the year 2009 the company issued 8,000 shares on May 1 and retired 14,000 shares on October 31. For the year 2009 Ace Company reported net income of $249,690 after a casualty loss of $40,600 (net of tax).
Instructions
What earnings per share data should be reported at the bottom of its income statement, assuming that the casualty loss is extraordinary?
|
Event |
Dates Outstanding | Shares Outstanding | Fraction of Year | Weighted Shares | |
| Beginning balance | Jan. 1–May 1 | 200,000 | 4/12 | 66,667 | |
| Issued shares | May 1–Oct. 31 | 208,000 | 6/12 | 104,000 | |
| Reacquired shares | Oct. 31–Dec. 31 | 194,000 | 2/12 | 32,333 | |
| Weighted average number of shares outstanding | 203,000 | ||||
Income per share before extraordinary item
($249,690 + $40,600 = $290,290;
$290,290 ÷ 203,000 shares) $1.43
Extraordinary loss per share, net of tax
($40,600 ÷ 203,000) (.20)
Net income per share ($249,690 ÷ 203,000) $1.23
