I need help with 2 and 3 and if you can explain the process so I can understand.

Question

I need help with 2 and 3 and if you can explain the process so I can understand. Thank you

The 2015 balance sheet for Guthrie Corporation revealed the following information:

Common stock, $10 par, 50,000 shares issued and outstanding

Preferred stock, $100 par, 6%, cumulative stock, 1,000 shares issued and outstanding

During 2016, Guthrie reported net income of $225,000 and engaged in the following stock transactions:

Required:

1. Determine if Guthrie has a simple or complex capital structure.
Simple capital

2. Calculate the weighted average number of shares of stock that should be used to calculate EPS for the 2016 income statement. Round your answer to the nearest whole number.
shares

3. Compute the basic EPS that would be disclosed by Guthrie. Round your answer to 2 decimal places.
Basic EPS $

Mar. 1 Issued 10,000 shares of common stock for cash. Apr. 1 Reacquired 2,000 shares of common stock as treasury stock. Aug. 1 Resold 1,000 shares of treasury stock for cash. Sept. 1 Declared and issued a 50% stock dividend on common stock.

Explanation / Answer

2) We Summarise as follows

= Net Income / Weighted average number of outstanding shares

= 225000 / 67083, = $ 3

3) Basic EPS = Net Income / Outstanding shares

= 225000 / 88500,= $ 3

Time Period Number of shares outstanding Portion of year Weighted shares Remarks Jan 1 - March 1 50000 2/12 year 8333 Outstanding for 2 months Mar 1 - Apr 1 60000 1/12 year 5000 Outstanding for 1 month April 1- Aug 1 58000 4/12 year 19333 Outstanding for 4 months Aug 1 -sep 1 59000 1/12 year 4917 Outstanding for 1 month Sep 1 -dec 31 88500 4/12 year 29500 Outstanding for 4 months Weighted average number of outstanding share 67083

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.