Problem 16-6 (Part Level Submission) Monty Corporation is preparing the comparat
ID: 2338748 • Letter: P
Question
Problem 16-6 (Part Level Submission) Monty Corporation is preparing the comparative nancial statements for the annual report to its share olde or sca years en de y and n ao income from operations for the fiscal year ended May 31, 2017, was $1,755,000 and income from continuing operations for the fiscal year ended May 31, 2018, was $2,604,000. In both years, the company incurred a 10% interest expense on $2,412,000 of debt, an obligation that requires interest-only payments for 5 years. The company experienced a loss from discontinued operations of $619,000 on February 2018. The company uses a 40% effective tax rate for income taxes. The capital structure of Monty Corporation on June 1, 2016, consisted of 984,000 shares of common stock outstanding and 19,000 shares o $50 par value 6%, cumulative preferred stock. There were no preferred dividends in arrears, and the company had not issued any convertible securities, options, or warrants. On October 1, 2016, Monty sold an additional 486,000 shares of the common stock at $20 per share. Monty distributed a 20% stock dividend on the common shares outstanding on January 1, 2017. On December 1, 2017, Monty was able to sell an additional 805,000 shares of the common stock at $22 per share. These were the only common stock transactions that occurred during the two fiscal yearsExplanation / Answer
Solution b:
Computation of weighted average outstanding shares - May 31, 2017 - Monty Corporation Particulars Period outstanding Outstanding shares Fraction Weighted average outstanding shares Share outstanding at beginning at 01.06.2016 12 984000 12/12 984000 Share issued on 01.10.2016 8 486000 8/12 324000 Total 1308000 Stock dividend (20%) 261600 Weighted average outstanding shares 1569600