Question

Problem 16-09 a-b Ivanhoe Corporation is preparing the comparative financial statements to be included in the annual report to stockholders. Ivanhoe employs a fiscal year ending May 31. Income from operations before income taxes for Ivanhoe was $1,319,000 and $621,000, respectively, for fiscal years ended May 31, 2021 and 2020. Ivanhoe experienced a loss from discontinued operations of $416,000 on March 3, 2021. A 20% combined income tax rate pertains to any and all of Ivanhoe Corporation’s profits, gains, and losses. Ivanhoe’s capital structure consists of preferred stock and common stock. The company has not issued any convertible securities or warrants and there are no outstanding stock options. Ivanhoe issued 37,300 shares of $100 par value, 6% cumulative preferred stock in 2017. All of this stock is outstanding, and no preferred dividends are in arrears. There were 1,071,600 shares of $1 par common stock outstanding on June 1, 2019. On September 1, 2019, Ivanhoe sold an additional 366,000 shares of the common stock at $18 per share. Ivanhoe distributed a 20% stock dividend on the common shares outstanding on December 1, 2020. These were the only common stock transactions during the past 2 fiscal years.

Determine the weighted-average number of common shares that would be used in computing earnings per share on the current comparative income statement for: Weighted-average number of common shares (1) The year ended May 31, 2020. (2) The year ended May 31, 2021. LINK TO TEXT

Starting with income from operations before income taxes, prepare a comparative income statement for the years ended May 31, 2021 and 2020. The statement will be part of Ivanhoe Corporation’s annual report to stockholders and should include appropriate earnings per share presentation.

Answer 1

What is weighted number of shares:

It is the total number of outstanding shares multiplied by the duration of the reporting period in which respective shares are covered.

Calculation of Weighted average number of shares:

Particulars	Before Stock Dividend	After Stock Dividend
Total number of outstanding shares	1071600	1285920
Issue of shares in September 2019	366000	439200
Total number of shares outstanding on May 2020	1437600	1725120
Weighted average no of shares outstanding:
On 31-05-2020
12,85,920*3/12		321480
1725120*9/12		1293840
Total		1615320
On 31-05-2021
1725120*12/12		1725120

Preparation Income Statement:

Income Statement of Ivanhoe Corporation
Particulars	Year2021	Year 2020
Income from operations	13,19,000	6,21,000
Less: Tax@20%	(263800)	(124200)
Total Income From Continuing Operations	10,55,200	4,96,800
Less: Loss from discontinuing operations	(332800)
4,16,000*80%
Net Income	7,22,400	4,96,800
Preferred Dividend
(37300*100*6/100)	2,23,800	2,23,800
Income from continuing operation post dividend	8,31,400	2,73,000
Common stock	1725120	1615320
Continuing operating Income per share	0.482	0.169
Loss per share	(0.193)
Net income per share	0.289	0.169