On January 1, 2007, Vermont Maple Corp. had 2,650,000 shares ofcommon stock issu

Question

On January 1, 2007, Vermont Maple Corp. had 2,650,000 shares ofcommon stock issued and outstanding. During 2007, it had thefollowing transactions that affected the common stock account.

Mar. 1            Issued 250,000 shares in exchange for land

Apr. 1            Acquired 200,000 shares of treasury stock

July 1             Issued a 20% stock dividend

Sept. 1           Reissued 240,000 shares of treasury stock

(adjusted for 20% stock dividend)

Oct. 1            Issued a 2-for-1 stock split

Instructions

(a) Determine the weighted average number ofshares outstanding as of December 31, 2007.

(b) Assume that Vermont Maple Corp. earned netincome of $8,352,000 during 2007. In addition, it had 200,000shares of 9%, $100 par value nonconvertible, cumulative preferredstock outstanding for the entire year. Because of liquidityconsiderations, however, the company did not declare and pay apreferred dividend in 2006 or 2007. Compute earnings per share for2007, using the weighted average number of shares determined inpart (a).

(c) Assume the same facts as in part (b),except that the preferred stock was noncumulative. Compute

earnings per share for 2007.

(d) Assume the same facts as in part (b),except that net income included a loss from discontinued

operations of $500,000, net of $300,000 in income taxes. Computeearnings per share for 2007.

Explanation / Answer

Date Number ofstock Total Portion oftime Weight-average Jan 01 2,650,000 2,650,000 2 months 441666.67 Mar 01 250,000 2,900,000 1 month 241666.67 Apr 01 -200,000 2,700,000 3 months 675000 Jul 01 540,000 3,240,000 2 months 540000 Sept 1 240,000 3,480,000 1 month 290000 Oct 01 3,480,000 6,960,000 3 months 1740000 Weight average numberof shares 3928333.33

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