Question

Exercise 16-15 Waterway Inc. uses a calendar year for financial reporting. The company is authorized to issue 8,480,000 shares of $10 par common stock. At no time has Waterway issued any potentially dilutive securities. Listed below is a summary of Waterway’s common stock activities. 1. Number of common shares issued and outstanding at December 31, 2018 1,900,000 2. Shares issued as a result of a 10% stock dividend on September 30, 2019 190,000 3. Shares issued for cash on March 31, 2020 2,130,000 Number of common shares issued and outstanding at December 31, 2020 4,220,000 4. A 2-for-1 stock split of Waterway’s common stock took place on March 31, 2021 Compute the weighted-average number of common shares used in computing earnings per common share for 2019 on the 2020 comparative income statement. shares Compute the weighted-average number of common shares used in computing earnings per common share for 2020 on the 2020 comparative income statement. shares Compute the weighted-average number of common shares to be used in computing earnings per common share for 2020 on the 2021 comparative income statement. shares Compute the weighted-average number of common shares to be used in computing earnings per common share for 2021 on the 2021 comparative income statement. shares Click if you would like to Show Work for this question: Open Show Work

Answer 1

Solution:

Weighted avg. shares outstanding for 2019 on 2020 comparative statement:

2019 Transaction of Increase/(decrease) No. of shares Dates shares in shares outstanding (A) Jan.1 Beg. Balance 1,900,000 1,900,000 Sept. 30 Stock dividend 190,000 2,090,000 Weighted Average Number of Shares Outstanding ---> Weighted Weights avg. shares {C} {A x C} 9/12 1,425,000 3/12 522,500 1,947,500

Weighted avg. shares outstanding for 2020 on 2020 comparative statement:

2020 Dates Transaction of shares Increase/(decrease) No. of shares in shares outstanding (A) Weighted Weights avg. shares {C} {AⓇC} 3/12 522,500 9/12 3,165,000 3,687,500 Jan.1 Beg. Balance 2,090,000 2,090,000 Mar. 31 Shares issued 2,130,000 4,220,000 Weighted Average Number of Shares Outstanding --->

Weighted avg. shares outstanding for 2020 on 2021 comparative statement = 3,687,500 (same as above)

Weighted avg. shares outstanding for 2021 on 2021 comparative statement would be as follows:

2021 Dates Transaction of shares Increase/(decrease) No. of shares in shares outstanding (A) Weighted Weights avg. shares {C} {AxC} 3/12 1,055,000 9/12 9,495,000 10,550,000 Jan.1 Beg. Balance 4,220,000 4,220,000 Mar. 31 stock split 8,440,000 12,660,000 Weighted Average Number of Shares Outstanding --->