On January 1, 2012, Chang Corp. had 530,000 shares of common stock outstanding.

Question

On January 1, 2012, Chang Corp. had 530,000 shares of common stock outstanding. During 2012, it had the following transactions that affected the Common Stock account.

A. Determine the weighted-average number of shares outstanding as of December 31, 2012.

Answer: 2171375

B. Assume that Chang Corp. earned net income of $3,351,000 during 2012. In addition, it had 103,000 shares of 9%, $100 par nonconvertible, noncumulative preferred stock outstanding for the entire year. Because of liquidity considerations, however, the company did not declare and pay a preferred dividend in 2012. Compute earnings per share for 2012, using the weighted-average number of shares determined in part A.

Answer: 1.54

C. Assume the same facts as in part (b), except that the preferred stock was cumulative. Compute earnings per share for 2012.

February 1 Issued 146,000 shares March 1 Issued a 20% stock dividend May 1 Acquired 117,000 shares of treasury stock June 1 Issued a 3-for-1 stock split October 1 Reissued 62,300 shares of treasury stock

Explanation / Answer

Hi,

Please find the detailed answer as follows:

EPS = (3351000 - 103000*9%*100)/2171375 = 1.116 or 1.12

Answer is 1.12.

Thanks.

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