Question

The following information is provided by CBC Corporation:

On Jan 1st, 2018, CBC Cor. had 1,000,000 ordinary shares outstanding.

On March 1, it issued 150,000 new ordinary shares.

On July 1st, the company declared and issued a 3-for-1 share split.

On October 1, the corporation repurchased 600,000 of its own outstanding shares.

As of December 31st, 2018, the company reports a net income of $9,675,000 and declared preference dividends of $1,612,500

Compute the weighted average number of shares for 2018.

Select one:

a. 3,450,000 ordinary shares

b. 2,100,000 Ordinary shares

c. 3,225,000 Ordinary shares

d. 2,850,000 ordinary shares

Compute the Basic Earnings Per Share (EPS) for 2018.

Select one:

a. $3.5

b. $2

c. $2.5

d. $3

Answer 1

Outstanding shares = 1,000,000*12/12= 1,000,000 shares

New shares = 150,000*10/12= 125,000

Total as on March 1 = 1,000,000 + 125,000 = 1,125,000 shares

July 1 split shares 3 for 1

= 1,125,000*3 = 3,375,000 shares

Therefore total shares = 3,375,000

Repurchased shares =600,000*3/12= 150,000 shares

Balance shares as on October 1 = 3,375,000 - 150,000

= 3,225,000 shares

Therefore the correct option is C

Net income = $9,675,000

Preference dividend = 1,612,500

Income available to common stock holders

= 9,675,000 - 1,612,500

= $8,062,500

Earning per share = Income available for common shareholder/outstanding shares

= 8,062,500/3,225,000

= $2.5

Therefore the correct option is C

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