Question

On January 1, 2012, Poelman Corp. had 580,000 common shares outstanding. During 2012, it had the following transactions that affected the common share account:
Feb. 1 Issued 180,000 shares.
Mar. 1 Issued a 10% stock dividend.
May 1 Acquired 200,000 common shares and retired them.
June 1 Issued a 3-for-1 stock split.
Oct. 1 Issued 60,000 shares.
The company’s year-end is December 31.
Instructions
(a) Determine the weighted average number of shares outstanding as at December 31, 2012.
(b) Assume that Poelman earned net income of $3,456,000 during 2012. In addition, it had 100,000 9%, $100 par, non-convertible, non-cumulative preferred shares outstanding for the entire year. Because of liquidity limitations, however, the company did not declare and pay a preferred dividend in 2012. Calculate earnings per share for 2012, using the weighted average number of shares determined in part (a).
(c) Assume the same facts as in part (b), except that the preferred shares were cumulative. Calculate earnings per share for 2012.
(d) Assume the same facts as in part (b), except that net income included a loss from discontinued operations of $432,000, net of applicable income taxes. Calculate earnings per share for 2012.
(e) What is the reasoning behind using a weighted average calculation for the number of shares outstanding in the EPS ratio?


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  • CreatedAugust 23, 2015
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