On January 1, 2008, Wilke Corp. had 480,000 shares of common stock outstanding. During 2008, it had the following transactions that affected the common stock account.
February 1 Issued 120,000 shares
March 1 Issued a 10% stock dividend
May 1 Acquired 100,000 shares of treasury stock
June 1 Issued a 3-for-1 stock split
October 1 Reissued 60,000 shares of treasury stock
a.
Determine the weighted-average number of shares outstanding as of December 31, 2008.
b.
Assume that Wilke Corp. earned net income of $3,456,000 during 2008. In addition, it had 100,000 shares of 9%, $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 2008. Compute earnings per share for 2008, using the weighted-average number of shares determined in part (a).
c.
Assume the same facts as in part (b), except that the preferred stock was cumulative. Compute earnings per share for 2008.
d.
Assume the same facts as in part (b), except that net income included an extraordinary gain of $864,000 and a loss from discontinued operations of $432,000. Both items are net of applicable income taxes. Compute earnings per share for 2008.
(a)
|
Event |
Dates
Outstanding |
Shares
Outstanding |
Restatement |
Fraction
of Year |
Weighted
Shares |
| Beginning balance | Jan. 1–Feb. 1 | 480,000 | 1.1 X 3.0 | 1/12 | 132,000 |
| Issued shares | Feb. 1–Mar. 1 | 600,000 | 1.1 X 3.0 | 1/12 | 165,000 |
| Stock dividend | Mar. 1–May 1 | 660,000 | 3.0 | 2/12 | 330,000 |
| Reacquired shares | May 1–June 1 | 560,000 | 3.0 | 1/12 | 140,000 |
| Stock split | June 1–Oct. 1 | 1,680,000 | 4/12 | 560,000 | |
| Reissued shares | Oct. 1–Dec. 31 | 1,740,000 | 3/12 | 435,000 | |
| Weighted average number of shares outstanding | 1,762,000 | ||||
| (b) | Earnings Per Share = | $3,456,000 (Net Income) | = $1.96 |
| 1,762,000 (Weighted Average Shares) |
| (c) | Earnings Per Share = | $3,456,000 – $900,000 | = $1.45 |
| 1,762,000 |
(d) Income from continuing operationsa $1.72
Loss from discontinued operationsb (.25 )
Income before extraordinary item 1.47
Extraordinary gainc .49
Net income $1.96
a Net income $3,456,000
Deduct extraordinary gain (864,000 )
Add loss from discontinued operations 432,000
Income from continuing operations $3,024,000
| a$3,024,000 | = $1.72 |
| 1,762,000 |
| b$(432,000) | = $(.25) |
| 1,762,000 |
| c$864,000 | = $.49 |
