On January 1, 2016, Shamu Corporation had 100,000 shares of common stock outstan
ID: 2480907 • Letter: O
Question
On January 1, 2016, Shamu Corporation had 100,000 shares of common stock outstanding. The following transactions occurred during 2016: March 1: Reacquired 3,800 shares, accounted for as treasury stock. September 30: Sold all the treasury shares. December 1: Sold 12,800 new shares for cash. December 31 Reported a net income of $206,500. The following transactions occurred during 2017: January 10: Declared and issued a 30% stock dividend. December 31: Reported a net income of $276,800. 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 2017. (Round your answers to 2 decimal places.)
Explanation / Answer
weighted average number of shares for 2016 = [100000*2/12] + [(100000-3800)*7/12] + [100000*2/12] + [112800 *1/12]
= 16666.67+ 56116.67+ 16666.67+ 9400
= 98850 shares approx
Number of shares after as stock dividend = 112800*130% = 146640
Number of shares issued as stock dividend = 112800*.30 = 33840
Basic EPS:2017 = Net income /number of shares = 276800 / 146640 = $ 1.89 per share
2016 = 206500 / (98850+ 33840)
= 206500 / 132690 = $ 1.56 per share