Question

Exercise 17-4 (Part Level Submission) On January 1, 2020, Wildhorse Limited had shares outstanding as follows: 7% cumulative preferred shares, $100 par value, 10,400 shares issued and outstanding $1,040,000 Common shares, 208,000 shares issued and outstanding 2,080,000 To acquire the net assets of three smaller companies, the company authorized the issuance of an additional 311,000 common shares. The acquisitions were as follows: Date of Acquisition Company A: April 1, 2020 Company B: July 1, 2020 Company C: October 1, 2020 Shares Issued 167,000 86,000 58,000 On May 14, 2020, Wildhorse realized a $95,000 gain (before tax) on a discontinued operation from a business segment that had originally been purchased in 2000. On December 31, 2020, the company recorded income of $691,000 before tax, not including the discontinued operation gain. Wildhorse has a 40% tax rate. (a) Calculate the earnings per share for 2020 as it should be reported to shareholders. (Round answer to 2 decimal places, e.g. 15.25.) Earnings per share Income before gain from discontinued operations Discontinued operations gain net of tax Net income

Answer 1

Income before gain from discontinued operations = $ 414,600 (691,000 Less 40%)

Discontinued operations gain net of tax = $ 57,000 (95,000 Less 40% tax)

Net Income = $471,600.

Total Weighted Average Shares outstanding = 390,750 Shares (Refer working below)

EPS = 471,600/390,750 = $1.21

Working:

No of Share	No of Months	Weighted Average
208,000	12	208,000
167,000	9	125,250
86,000	6	43,000
58,000	3	14,500
	Total	390,750

Weighted average is calculated by multiplying the shares with No of months it was issued for during the year and dividing by 12 months (full year). Eg: 167,000 x (9/12) = 125,250.