The shareholders' equity accounts of Blue Bay Logistics Ltd. on April 1, 2013, the beginning of the fiscal year, are as follows:
$6 preferred shares (20,000 issued)...............$1,800,000
Common shares (500,000 issued)...................3,750,000
Retained earnings.....................................1,550,000
Total shareholders' equity..........................$7,100,000
During the year, the following transactions occurred:
2013 June 1 Reacquired 12,000 common shares for $9 per share.
July 1 Issued 50,000 common shares for $10 per share.
Sept. 30 Reacquired 8,000 common shares for $9.50 per share.
2014 Jan. 31 Issued 60,000 common shares in exchange for land. The land's fair value was $600,000.
Mar. 31 Profit for the year ended March 31, 2014, was $973,600.
Instructions
(a) Calculate the weighted average number of common shares for the year.
(b) Assuming the preferred shares are cumulative and one year in arrears:
1. Calculate the earnings per share if no preferred dividends are declared during the year.
2. Calculate the earnings per share if the preferred share dividends for the current and prior year are declared during the year.
(c) Assuming the preferred shares are noncumulative:
1. Calculate the earnings per share if no preferred share dividends are declared during the year.
2. Calculate the earnings per share if the company declares a preferred share dividend of $80,000.
Taking It Further
Why is earnings per share an important measure for common shareholders but not for preferred shareholders?