Chapter+17+Part+1+9th+Ed

Chapter+17+Part+1+9th+Ed - EXERCISE 17-1 (15-20 minutes)...

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EXERCISE 17-1 (15-20 minutes) (a) Event Dates Outstanding Shares Outstanding Resta- tement Fraction of Year Weighted Shares Beginning balance Issued shares Stock dividend Acquired shares Stock split Issued shares Jan. 1–Feb. 1 Feb. 1–Mar. 1 Mar. 1–May 1 May 1–June 1 June 1–Oct. 1 Oct. 1–Dec. 31 580,000 760,000 836,000 636,000 1,908,000 1,968,000 1.1 X 3.0 1.1 X 3.0 3.0 3.0 1/12 1/12 2/12 1/12 4/12 3/12 159,500 209,000 418,000 159,000 636,000 492,000 Weighted average number of shares outstanding 2,073,500 (b) Earnings Per Share = = $1.67 (c) Earnings Per Share = = $1.23
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EXERCISE 17-1 (Continued) (d) Income from continuing operations a $1.88 Loss from discontinued operations b (.21 ) Net income $1.67 Net income $3,456,000 Add loss from discontinued operations 432,000 Income from continuing operations $3,888,000 a = $1.88 b = $(.21) (e) The earnings process occurs continuously throughout the fiscal year. We must therefore recognize that the income for the year was generated from the capital available throughout the year, rather than the amount of capital from the common shares at any particular point in time. It is necessary to adjust the denominator of the EPS ratio to reflect the lengths of time during the year that the different amounts of capital from the different number of shares outstanding were available to finance the generation of earnings during the year.
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EXERCISE 17-8 (15-25 minutes) (a) 7,150,000 shares Jan. 1, 2011–Sept. 30, 2011 (6,500,000 X 9/12) 4,875,000 Retroactive adjustment for stock dividend X 1.10 Jan. 1, 2011–Sept. 30, 2011, as adjusted 5,362,500 Oct. 1, 2011–Dec. 31, 2011 (7,150,000 X 3/12) 1,787,500 7,150,000 Another way to view this transaction is that the 6,500,000 shares at the beginning of the year must be restated for the stock dividend regardless of when during the year the stock dividend occurs. (b) 9,025,000 shares Jan. 1, 2012–Mar. 31, 2012 (7,150,000 X 3/12) 1,787,500 Apr. 1, 2012–Dec. 31, 2012 (9,650,000 X 9/12) 7,237,500 9,025,000 (c) 27,075,000 shares 2012 weighted average number of shares previously calculated 9,025,000 Retroactive adjustment for stock split X 3 27,075,000 (d) 28,950,000 shares Jan. 1, 2012–Mar. 31, 2012 (9,650,000 X 3/12) 2,412,500 Retroactive adjustment for stock split X 3 Jan. 1, 2012–Mar. 31, 2012, as adjusted 7,237,500 Apr. 1, 2012–Dec. 31, 2012 (28,950,000 X 9/12) 21,712,500 28,950,000 Another way to view this transaction is that the 9,650,000 shares at the beginning of the year must be restated for the stock split regardless of when during the year the stock split occurs.
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This note was uploaded on 08/02/2011 for the course ACCT 352 taught by Professor Freeman during the Summer '11 term at Windsor.

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Chapter+17+Part+1+9th+Ed - EXERCISE 17-1 (15-20 minutes)...

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