1. Compute the weighted average number of outstanding common shares used to comp
ID: 2423387 • Letter: 1
Question
1. Compute the weighted average number of outstanding common shares used to compute Retro's basic earnings per share for 2014.
Information Related to 2014 common stock issuances, purchases, etc.
As of January 1st, Retro had 50,000 shares of $2 par value common stock outstanding
On March 1st, Retro issued an additional 30,000 shares of ocmmon stock for cash
On May 1st, Retro issued a 2-for-1 stock split (& therefore, reduced par to $1 per share)
On August 1st, Retro purchased 15,000 shares of common stock for its treasury
On November 1st, Retro sold 6,000 shares of the treasury stock purchased on August 1st.
Net Income= $250,000
Explanation / Answer
Basic Earnings available to Equity shares =
Earnings available to equity shares / Weighted average number of shares outstanding during the year
Calculation of Weighted average No. of shares outstanding during the year:
= (50000*12/12) + (30000*10/12) + 80000 + (-15000*5/12) + (6000 * 2/12)
= 149750 shares
BEPS = 250000 / 149750
BEPS = $ 1.67
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