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The 2015 balance sheet for Guthrie Corporation revealed the following informatio

ID: 2468272 • Letter: T

Question

The 2015 balance sheet for Guthrie Corporation revealed the following information:

Common stock, $10 par, 50,000 shares issued and outstanding

Preferred stock, $100 par, 6%, cumulative stock, 1,000 shares issued and outstanding

During 2016, Guthrie reported net income of $225,000 and engaged in the following stock transactions:

Sept 1 Declared and issued a 50% stock dividend on common stock.


2. Calculate the weighted average number of shares of stock that should be used to calculate EPS for the 2016 income statement. Round your answer to the nearest whole number.

3. Compute the basic EPS that would be disclosed by Guthrie. Round your answer to 2 decimal places.

Mar. 1 Issued 10,000 shares of common stock for cash. Apr. 1 Reacquired 2,000 shares of common stock as treasury stock. Aug. 1 Resold 1,000 shares of treasury stock for cash.

Sept 1 Declared and issued a 50% stock dividend on common stock.


2. Calculate the weighted average number of shares of stock that should be used to calculate EPS for the 2016 income statement. Round your answer to the nearest whole number.

3. Compute the basic EPS that would be disclosed by Guthrie. Round your answer to 2 decimal places.

Explanation / Answer

Calculate the weighted average number of shares of stock that should be used to calculate EPS for the 2016 income statement:

Details

Common stock @$10

50000

Outstanding preferred stock @$100

1000

Add: Mar 1 - Issue of new common stock shares

10000

Less: Apr -1 - Reacquired of common stock shares

2000

Add: Aug -1 - resold shares

1000

Total number of common stock shares

59000

Compute the basic EPS that would be disclosed by Guthrie:

Details

Amount

Total number of common stock shares

       59,000.00

Dividend

$ 112,500.00

EPS (112500/59000)

$               1.91

Therefore, EPS is $1.91 for common stock.

Details

Common stock @$10

50000

Outstanding preferred stock @$100

1000

Add: Mar 1 - Issue of new common stock shares

10000

Less: Apr -1 - Reacquired of common stock shares

2000

Add: Aug -1 - resold shares

1000

Total number of common stock shares

59000