The shareholders' equity accounts of Gualtieri Inc. on August 1, 2013, the beginning of its fiscal year,

Question:

The shareholders' equity accounts of Gualtieri Inc. on August 1, 2013, the beginning of its fiscal year, are as follows:
$4 preferred shares (25,000 issued)...........................$1,250,000
Common shares (350,000 issued)...............................3,750,000
Retained earnings.................................................2,250,000
Total shareholders' equity......................................$7,250,000
During the year, the following transactions occurred:
Nov. 30 Issued 37,500 common shares for $12 per share.
Feb. 1 Reacquired 6,000 common shares for $10 per share.
Mar. 1 Issued 30,000 common shares in exchange for equipment. The equipment's fair value was $40,000.
July 31 Profit for the year ended July 31, 2014, was $1,022,800.
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 of $60,000.
Taking It Further
Why is it important to use a weighted average number of shares in the earnings per share calculations? Why not just use the average number of shares during the year?
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...