Question

On January 1, 2020, Wildhorse Ltd. had 522,000 common shares outstanding. During 2020, it had the following transactions that affected the common share account:

Feb. 1		Issued 154,000 shares.
Mar. 1		Issued a 20% stock dividend.
May 1		Acquired 174,000 common shares and retired them.
June 1		Issued a 2-for-1 stock split.
Oct. 1		Issued 43,000 shares.

The company’s year end is December 31.

Part 1

Incorrect answer iconYour answer is incorrect.

Determine the weighted average number of shares outstanding as at December 31, 2020. (Round answer to 0 decimal places, e.g. 5,275.)

Weighted average number of shares outstanding

=enter the Weighted average number of shares outstanding_______________________

Part 2

Assume that Wildhorse earned net income of $3,553,000 during 2020. In addition, it had 110,000 of 11%, $100 par, non-convertible, non–cumulative preferred shares outstanding for the entire year. Because of liquidity limitations, however, the company did not declare and pay a preferred dividend in 2020.

Calculate earnings per share for 2020, using the weighted average number of shares determined above. (Round answer to 2 decimal places, e.g. 15.25.)

Earnings per share

_____________

Part 3

Assume that Wildhorse earned net income of $3,553,000 during 2020. In addition, it had 110,000 of 11%, $100 par, non-convertible, cumulative preferred shares outstanding for the entire year. Because of liquidity limitations, however, the company did not declare and pay a preferred dividend in 2020.

Calculate earnings per share for 2020, using the weighted average number of shares determined above. (Round answer to 2 decimal places, e.g. 15.25.)

Earnings per share

$________________

Assume that Wildhorse earned net income of $3,553,000 during 2020. In addition, it had 110,000 of 11%, $100 par, non-convertible, non–cumulative preferred shares outstanding for the entire year. Because of liquidity limitations, however, the company did not declare and pay a preferred dividend in 2020. Assume that net income included a loss from discontinued operations of $421,000, net of applicable income taxes.

Calculate earnings per share for 2020. (Round answers to 2 decimal places, e.g. 15.25.)

		Earnings per share
Income from continuing operations		$
Loss from discontinued operations		$
Net income		$

Answer 1

Solution a:

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	522000	1.2	2	1	12	104400
Issued Shares	676000	1.2	2	1	12	135200
Stock Dividend	811200		2	2	12	270400
Reacquired Shares	637200		2	1	12	106200
3-for-1 stock split	1274400			4	12	424800
Reissued shares	1317400			3	12	329350
Total weighted average number of shares outstanding						1370350

Solution b:

Earnings per share = Net income / weighted average number of shares outstanding = $3553000 / 1370350 = $2.59

Solution c:

Preferred Dividend = 110000* 100*11% = $$1,210,000

Earnings per share = (Net income- Preferred dividend) / weighted average number of shares outstanding = ($3553000- $121000) / 1370350 = $1.71

Solution d:

Net Income	$35,53,000
Add: Loss from Discontinued Operations	$4,21,000
Income from continued operations	$39,74,000

Income Statement
For the Year ended Dec 31, 2020
Income from continued operations ($3974000/1370350)	$2.90
Loss from Discontinued Operations ($421000/ 1370350)	-$0.31
Net Income ($3553000/1370350)	$2.59