On January 1, 2023, Trigson Ltd. had 580,000 common shares outstanding. During 2023, 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, 2023. Round to the nearest share.

b. Assume that Trigson earned net income of $2.5 million during 2023. In addition, it had 100,000 of 8%, $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 2023. Calculate earnings per share for 2023, using the weighted average number of shares determined in part (a). Round to the nearest cent.

c. Assume the same facts as in part (b), except that the preferred shares were cumulative. Calculate earnings per share for 2023. Round to the nearest cent.

d. Assume the same facts as in part (b), except that net income included a loss from discontinued operations of $200,000, net of applicable income tax. Calculate earnings per share for 2023. Round to the nearest cent.

e. What is the reasoning behind using a weighted average calculation for the number of shares outstanding in the EPS ratio?