Assume XYZ uses a calendar year for financial reporting. The company is authoriz

Question

Assume XYZ uses a calendar year for financial reporting. The company is authorized to issue 32,500,000 shares of $1 par common stock. Listed below is a summary of XYZ’s common stock activities.

2,600,000

780,000

1,625,000

5,005,000

1-Number of common shares issued and outstanding at December 31, 2014

2-Shares issued as a result of a 30% stock dividend on Sept. 1, 2015

3-Shares issued for cash on June 30, 2016

Number of common shares issued and outstanding at December 31, 2016

4-A 2-for-1 stock split of XYZ’s common stock took place on Oct. 1, 2017

Instructions:

A)Compute the weighted average number of common shares to be used in computing earnings per common share for 2015 on the 2016 comparative income statement.

B) Compute the weighted average number of common shares to be used in computing earnings per common share for 2016 on the 2016 comparative income statement.

Compute the weighted average number of common shares to be used in computing earnings per common share for 2016 on the 2017 comparative income statement.         

Compute the weighted average number of common shares to be used in computing earnings per common share for 2017 on the 2017 comparative income statement.         

2,600,000

780,000

1,625,000

5,005,000

Explanation / Answer

1) Jan. 1, 2015–Aug. 31, 2015 (2,600,000 X 8/12) 1,733,333.33 Retroactive adjustment for stock dividend x 1.30 Jan. 1, 2015–Aug. 31, 2015, as adjusted 2,253,333.33 Sep. 1, 2013 - Dec. 31, 2013 (2,600,000 + 780,000) x 4/12) 1,126,666.67 Weighted-average outstanding shares outstanding 3,380,000.00 2) Jan.1, 2016 - Jun. 30,2016 ( 3,380,000 x 6/12 )= 1,690,000 Jul.1,2016 - Dec.3,2016 (5,005,000 x 6/12) 2,502,500 Weighted-average outstanding shares outstanding 4,192,500 3) 2016 weighted average number of shares previously computed 4,192,500 Adjustment for stock split 2 for 1 x2 Weighted-average outstanding shares outstanding 8,385,000 4) Shares Outstanding Jan.1,2017 to Sep.30 2017 = 5,005,000 x 9/12 3753750 Split 2 for1 Jan.1 2017 to sep.30 ,2017 = 5,005,000 x 9/12 3753750 Oct 1 ,2017 = (5,005,000 + 5,005,000) x 3/12 2502500 Weighted-average outstanding shares outstanding 10010000

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