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Problem 16-6

# Problem 16-6 - Number of shares to compute basic earnings...

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(a) The number of shares used to compute basic earnings per share is 6,736,000, as calculated below. Event Dates Outstanding Shares Outstanding Restatement Fraction of Year Weighted Shares Beginning Balance, including 5% stock dividend Jan. 1–Apr. 1 3,150,000 2.0 3/12 1,575,000 Conversion of preferred stock Apr. 1–July 1 3,360,000 2.0 3/12 1,680,000 Stock split July 1–Aug. 1 6,720,000 1/12 560,000 Issued shares for building Aug. 1–Nov. 1 7,020,000 3/12 1,755,000 Purchase of Treasury stock Nov. 1–Dec. 31 6,996,000 2/12 1,166,000 Total number of common shares to compute basic earnings per share 6,736,000 (b) The number of shares used to compute diluted earnings per share is

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7,891,000, as shown below.
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Unformatted text preview: Number of shares to compute basic earnings per share 6,736,000 Convertible preferred stock—still outstanding (500,000 X 2 X 1.05) 1,050,000 Convertible preferred stock—converted (200,000 X 2 X 1.05 X 3/12) 105,000 Number of shares to compute diluted earnings per share 7,891,000 (c) The adjusted net income to be used as the numerator in the basic earnings per share calculation for the year ended December 31, 2007, is \$11,900,000, as computed below. After-tax net income \$13,550,000 Preferred stock dividends March 31 (700,000 X \$.75) \$ 525,000 June 30, September 30, and December 31 (500,000 X \$.75 X 3) 1,125,000 1,650,000 Adjusted net income \$11,900,000...
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Problem 16-6 - Number of shares to compute basic earnings...

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