Question

Exercise 16-16

On January 1, 2018, Vermont Maple Corp. had 2,650,000 shares of common stock issued and outstanding. During 2018, it had the following transactions that affected the common stock account. Mar. 1 Issued 250,000 shares in exchange for land Apr. 1 Acquired 200,000 shares of treasury stock July 1 Issued a 20% stock dividend Sept. 1 Reissued 240,000 shares of treasury stock (adjusted for 20% stock dividend) Oct. 1 Issued a 2-for-1 stock split Required: Determine the weighted average number of shares outstanding as of December 31, 2018. Assume that Vermont Maple Corp. earned net income of $8,352,000 during 2018. In addition, it had 200,000 shares of 9%, $100 par value nonconvertible, cumulative preferred stock outstanding for the entire year. Because of liquidity considerations, however, the company did not declare and pay a preferred dividend in 2017 or 2018. Compute earnings per share for 2018, using the weighted-average number of shares determined in part (a). Assume the same facts as in part (b), except that the preferred stock was noncumulative. Compute earnings per share for 2018. Assume the same facts as in part (b), except that net income included a loss from discontinued operations of $500,000, net of $300,000 in income taxes. Compute earnings per share for 2018. Source: Kieso, Wygandt and Warfield, Intermediate Accounting 16th ed., E16-16B.

Requirement (a)

Event	Dates Outstanding	Shares Outstanding	Restatement	Fraction of Year	Weighted Shares
Beginning balance	Jan. 1–Mar. 1
Issued shares	Mar. 1–Apr. 1
Reacquired shares	Apr. 1–Jul. 1
Stock dividend	Jul. 1–Sep. 1
Reissued shares	Sep. 1–Oct. 1
Stock split	Oct. 1–Dec. 31
Weighted-average number of shares outstanding

Requirement (b) Cumulative Preferred Stock

EPS =

Requirement (c) Not Cumulative

EPS =

Requirement (d)

EPS:

Answer 1