Question

On January 1, 2018, Shamu Corporation had 100,000 shares of common stock outstanding. The following transactions occurred during 2018:

March		1:		Reacquired 3,900 shares, accounted for as treasury stock.
September		30:		Sold all the treasury shares.
December		1:		Sold 12,900 new shares for cash.
December		31:		Reported a net income of $207,500.

The following transactions occurred during 2019:

January		10:		Declared and issued a 20% stock dividend.
December		31:		Reported a net income of $277,800.

Required:
Calculate Shamu's basic earnings per share for both years for presentation in comparative financial statements that will be prepared at the end of 2019. (Round your answers to 2 decimal places.)

Answer 1

Basic Earning per share(BEPS)	=	Net Income available for shareholders
		Weighted average no. of common shares
Calculation of Weighted average no. of common shares after considering dividend affect for 2018
Jan 1:100,000 shares*1.20	1,20,000
Mar 1:3,900 shares*10/12*1.20	(3,900)
Sept 30:3,900 shares*3/12*1.20	1,170
Dec 31:12,900 shares*1/12*1.20	1,290
Weighted average no. of common shares	1,18,560
BEPS for 2018 =$207,500 / 118,560 shares =$1.75 per share
Calculation of Weighted average no. of common shares after considering dividend affect for 2019
Jan 1	1,00,000
Mar 1	(3,900)
Sept 30	3,900
Dec 31	12,900
Weighted average no. of common shares	1,12,900
BEPS for 2019 =$277,800 / 112,900 shares =$2.46 per share