Question

On January 1, 2021, Indigo Corp. had 502,000 shares of common stock outstanding. During 2021, it had the following transactions that affected the Common Stock account.

February 1		Issued 125,000 shares
March 1		Issued a 10% stock dividend
May 1		Acquired 98,000 shares of treasury stock
June 1		Issued a 3-for-1 stock split
October 1		Reissued 58,000 shares of treasury stock

The weighted-average number of shares outstanding

enter the weighted-average number of shares outstanding as of December 31, 2021 is 1853225

Assume that Indigo Corp. earned net income of $3,605,000 during 2021. In addition, it had 104,000 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 2021. Compute earnings per share for 2018, using the weighted-average number of shares determined in part (a). (Round answer to 2 decimal places, e.g. $2.55.)

Assume that Indigo Corp. earned net income of $3,605,000 during 2021. In addition, it had 104,000 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 2021. Compute earnings per share for 2018, using the weighted-average number of shares determined in part (a). (Round answer to 2 decimal places, e.g. $2.55.)

Earnings Per Share

Answer 1

Compute the weighted average number of shares outstanding as follows: A A B C D E F Statement showing weighted average number of shares Stock No. of Weighted dividend stock split No. of average shares restatement restatement months shares 3 Shares outstanding $502.000 1.1 $138,050 4 Issues shares $627,000 1.1 $172,425 5 Stock dividend $689,700 $344,850 6 Reacquired shares $591,700 $147,925 7 3 for 1 stock split $1,775,100 $591,700 8 Reissued shares $1,833,100 $458,275 Weighted average number 9 of shares outstanding $1,853,225 Prepare the above-mentioned table with excel formulae as follows: B C D E F Statement showing weighted average number of shares Stock stock split No. of Weighted average No. of shares dividend restatement months shares restatement 3 Shares outstanding 502000 1.1 =B3*C3*D3*E3/12 4 Issues shares =B3+125000 1.1 =B4*C4*D4*E4/12 5 Stock dividend =B4*1.1 =B5*D5*E5/12 6 Reacquired shares =B5-98000 =B6*D6*E6/12 7 3 for 1 stock split =B6*3 =B7*E7/12 8 Reissued shares =B7+58000 =B8*E8/12 number of shares 9 outstanding =SUM(F3:F8)

Compute earnings per share as follows: Net income Earnings per share = Weighted average no. of shares outstanding $3,605,000 1,853, 225 = $1.94