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NEW QUESTION: 1
On January 1, 2000 the Meery Lunch Co. had 509,000 shares of common stock outstanding. During
2 000 it had the following transactions that affected the common stock account.
February 1 Issued 133,000 shares
*
March 1 Issued 10% stock dividend
*
May 1 Acquired 114,000 shares of treasury stock
*
June 1 Issued a 3-1 stock split
*
October 1 Reissued 79,000 shares of treasury stock
*
Determine the weighted average number of shares outstanding as of December 31, 2000 and then assume that Meery Lunch Co earned net income of 3,456,000 during 2000. In addition it had 111,000 shares of 9%, $100 par non convertible, noncumulative preferred stock outstanding for the entire year.
Because of liquidity considerations however the company did not declare and pay any dividends in 2000.
Compute earnings per share for the year 2000.
A. 1.87
B. 2.96
C. 2.27
Answer: A
Explanation:
Jan 1 - Feb 1: 509,000 * 1.1 * 3 * 1/12 = 139,975 Feb 1 - May 1: (509,000 + 133,000) * 1.1 * 3
* 3/12 = 529,650 May 1 - Oct 1: (642,000 * 1.1 * 3 - 114,000 * 3) * 5/12 = 740,250 (1,679,700 + 79,000) * 3
/ 12 = 439,675 Total: 1,849,550 EPS= Net Income/ Weighted average shares = 3,456,000 / 1,849,550 =
1 .87


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