On January 1, 2017, Ivanhoe Ltd. had 500,000 common shares outstanding. During 2
ID: 2517629 • Letter: O
Question
On January 1, 2017, Ivanhoe Ltd. had 500,000 common shares outstanding. During 2017, it had the following transactions that affected the common share account: Feb. 1 Issued 157,000 shares. Mar. 1 Issued a 19% stock dividend. May 1 Acquired 168,000 common shares and retired them. June 1 Issued a 2-for-1 stock split. Oct. 1 Issued 71,000 shares. The company’s year end is December 31. Determine the weighted average number of shares outstanding as at December 31, 2017. Assume that Ivanhoe earned net income of $3,452,000 during 2017. In addition, it had 110,000 of 11%, $100 par, non-convertible, non–cumulative preferred shares outstanding for the entire year. Because of liquidity limitations, however, the company did not declare and pay a preferred dividend in 2017. Calculate earnings per share for 2017, using the weighted average number of shares determined above. Assume that Ivanhoe earned net income of $3,452,000 during 2017. In addition, it had 110,000 of 11%, $100 par, non-convertible, cumulative preferred shares outstanding for the entire year. Because of liquidity limitations, however, the company did not declare and pay a preferred dividend in 2017. Calculate earnings per share for 2017, using the weighted average number of shares determined above. Assume that Ivanhoe earned net income of $3,452,000 during 2017. In addition, it had 110,000 of 11%, $100 par, non-convertible, non–cumulative preferred shares outstanding for the entire year. Because of liquidity limitations, however, the company did not declare and pay a preferred dividend in 2017. Assume that net income included a loss from discontinued operations of $400,000, net of applicable income taxes. Calculate earnings per share for 2017
Explanation / Answer
Adjustment fo pre dividend shares to post dividend and stock split Stock Dividend Post Dividend Stock Split Post Stock Split 1-Jan Opening 500,000 95000 595,000 595,000 1,190,000 1-Feb Issued 157,000 29830 186,830 186,830 373,660 657,000 781,830 781,830 1,563,660 1-May Buy Back (168,000) (168,000) (336,000) 613,830 613,830 1,227,660 1-Oct Issued 71000 1,298,660 Calculation of weighted average number of shares Period Shares Outstanding Post Stock Dividend and Stock Split Fraction of Year Outstanding No of Shares Jan-17 1,190,000 1/12 99,166.7 February 2017 to April 2017 1,563,660 3/12 390,915.0 May to September 2017 1,227,660 5/12 511,525.0 October to December 2017 1,298,660 3/12 324,665.0 Weighted Average Number of Shares 1,326,271.7 Net Income- Case 1 $ 3,452,000 Since non cumulative, not to be substacted as they are not to be paiod in future Net Income- Case 2 3452000-(110000*100*11%) $ 2,242,000 Net Income- Case 3 Income from Continuing Operations 3452000+400000 $ 3,852,000 Loss from Discontiuing Operations $ (400,000) Net Income $ 3,452,000 EPS= Net Income Attributable to Equity Shareholders/ Weighted Average Number of Shares Case Net Income Weighted Average Number of Shares EPS 1 $ 3,452,000 1,326,271.7 2.60 2 $ 2,242,000 1,326,271.7 1.69 3- EPS from continuing operations $ 3,852,000 1,326,271.7 2.90 3- EPS from discontinuing operations $ (400,000) 1,326,271.7 (0.30) 3- EPS of the company $ 3,452,000 1,326,271.7 2.60
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