Question

Penn Company had 10,000,000 shares of common stock outstanding on January 1, 2018. Penn entered into...

Penn Company had 10,000,000 shares of common stock outstanding on January 1, 2018. Penn entered into the following stock transactions during 2018:

• 2,000,000 shares of common stock were issued on April 1st.

• 600,000 shares of common stock were purchased on May 1st and were being held as treasury stock.

• 500,000 shares of preferred stock were issued on July 1st.

• 400,000 shares of treasury stock were reissued on October 1st.

• A 2-for-1 common stock split was declared on November 1st.

• Bonds convertible into 1,200,000 shares of common stock were issued on December 1st; the bonds are considered to be dilutive.

Required:

Determine the number of shares to be used in the calculation of

1) Basic EPS

2) Diluted EPS.

Business   Accounting   
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Answer #1
Date shares stock spilt Outstanding shares No. of months weighted shares
Jan 1 2018 10000000 *2 20000000 3/12 5000000
1-Apr 12000000 *2 24000000 1/12 2000000
1-May 11400000 *2 22800000 5/12 9500000
(12000000-600000)
1-Oct 11800000 *2 23600000 1/12 1966667
(12000000-600000+400000)
1-Nov 23600000 23600000 2/12 3933333
Total 22400000
No. of stock for
Basic EPS 22400000
Diluted EPS 23600000
22400000+1200000
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