Assume that the following data relative to Kane Company for 2018 is available: N

Question

Assume that the following data relative to Kane Company for 2018 is available:
Net Income $2,860,000 Transactions in Common Shares Change Cumulative Jan. 1, 2018, Beginning number 710,000 Mar. 1, 2018, Purchase of treasury shares (58,800) 651,200 June 1, 2018, Stock split 2-1 651,200 1,302,400 Nov. 1, 2018, Issuance of shares 246,000 1,548,400 6% Cumulative Convertible Preferred Stock Sold at par, convertible into 190,000 shares of common (adjusted for split). $950,000 Stock Options Exercisable at the option price of $25 per share. Average market price in 2018, $30 (market price and option price adjusted for split). 90,000 shares

Explanation / Answer

1) Weighted Averege shares outstanding is calculation is done by incorporating all the changes (viz Reissuance, purchase, sell) done in reporting period.

As per given details Weighted Average Shares outstanding would be as follows;

2) Earning Per Share: Earning per share is calculated by deviding Net income available for shareholders after reducing dividend, by Weighted Average no of shares outstanding.

Date Particulars No of shares Period (No of Months) Weighted Average shares Outstanding Calculation No Of shares Jan 1'2018 Opening No of shares 7,10,000 2 *=710000*2/12 1,18,333 Mar 1'2018 Purchase of treasury shares 6,51,200 3 *=651200*3/12 1,62,800 June 1'2018 Stock split 2-1 13,02,400 5 *=1302400*5/12 5,42,667 Nov 1'2018 Issuance of shares 15,48,400 2 *=1548000*2/12 2,58,067 Total Weighted Average no of shares outstanding 10,81,867

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