Question

The following information was obtained from Rando Corporation records on December 31, 2019. Preferred Shares, $3...

The following information was obtained from Rando Corporation records on December 31, 2019.

Preferred Shares, $3 cumulative*, 25,000 shares authorized and outstanding

$450,000

Common Shares, unlimited authorization, 180,000 shares outstanding

$500,000

Retained Earnings

$760,000

*no dividends have been declared in 2019 and 2020

Assume the following share transactions occurred in 2020:

Apr 1

Issued 120,000 common shares at $13.00 per share.

Oct 1

Repurchased and cancelled 60,000 common shares at $15.00 per share.

) Calculate the weighted average of common shares for year ended December 31, 2020.

b) Calculate the earning per share for year ended December 31, 2020. Assume profit for 2020 was $450,000.

Business   Accounting   
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Answer #1

(a)

Computation of Weighted Average Number of Share:

Weighted Average Number of share = (180000 shares * 3/12) + (300000 shares * 6/12) + (240000 shares * 3/12)

= 45000 shares + 150000 shares + 60000 shares

= 255000 shares.

(b)

Computation of Earnings per share:

Net profit = $450000

Less: Preferred stock Dividend = (25000 shares * $3)*2 = $150000

Earnings available of common  shareholder = $300000

Earning per share = Earnings available of common  shareholder / Weighted Average Number of share

= $300000 / 255000

= $1.18

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