Question

Exercise 16-16 On January 1, 2018, Carla Corp. had 480,000 shares of common stock outstanding. During 2018, it had the following transactions that affected the Common Stock account February 1 Issued 119,000 shares March 1 Issued a 10% stock dividend Acquired 97,000 shares of treasury stock May 1 Issued a 3-for-1 stock split June 1 October 1 Reissued 61,000 shares of treasury stock Determine the weighted-average number of shares outstanding as of December 31, 2018. The weighted-average number of shares outstanding LINK TO TEXT Assume that Carla Corp. earned net income of $3,362,000 during 2018. In addition, it had 100,000 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 2018. 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 LINK Tο ΤΕXT

Answer 1

Solution 1:

Computation of weighted average outastanding shares
	Number of shares	Stock Dividend Restatement	Stock Split Restatement	No. of months	Total Months	Weighted-average shares
Shares outstanding	480000	1.1	3	1	12	132000
Issued Shares	599000	1.1	3	1	12	164725
Stock Dividend	658900		3	2	12	329450
Reacquired Shares	561900		3	1	12	140475
3-for-1 stock split	1685700			4	12	561900
Reissued shares	1746700			3	12	436675
Total weighted average number of shares outstanding						1765225

Solution 2:

Earnings per share = Net income / weighted average number of shares outstanding = $3362000 / 1765225 = $1.90

Solution 3:

Preferred dividend = 100000*$100*9% = $900,000

Earnings per share = (Net income- Preferred Dividend) / weighted average number of shares outstanding = ($3362000- $900000) / 1765225 = $1.39

Solution 4:

Net Income	$33,62,000
Add: Loss from Discontinued Operations	$4,47,000
Income from continued operations	$38,09,000

Income Statement
For the Year ended Dec 31, 2018
Income from continued operations ($3809000/1765225)	$2.16
Loss from Discontinued Operations ($447000/ 1765225)	-$0.25
Net Income ($3362000/1765225)	$1.90