On January 1, 2021, Pharoah Corp. had 491,000 shares of common stock outstanding. During 2021, it had the following transactions that affected the Common Stock account.February 1Issued 116,000 sharesMarch 1Issued a 10% stock dividendMay 1Acquired 96,000 shares of treasury stockJune 1Issued a 3-for-1 stock splitOctober 1Reissued 59,000 shares of treasury stockAssume that Pharoah Corp. earned net income of $3,434,000 during 2021. In addition, it had 102,000 shares of 9%, $100 par nonconvertible, noncumulative preferred stock outstanding for the entire year. Because of liquidity considerations, however, the company did not declare and pay a preferred dividend in 2021. Compute earnings per share for 2018, using the weighted-average number of shares determined in part (a).Earnings Per Share?

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Asked Sep 13, 2019
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On January 1, 2021, Pharoah Corp. had 491,000 shares of common stock outstanding. During 2021, it had the following transactions that affected the Common Stock account.

February 1

Issued 116,000 shares
March 1

Issued a 10% stock dividend
May 1

Acquired 96,000 shares of treasury stock
June 1

Issued a 3-for-1 stock split
October 1

Reissued 59,000 shares of treasury stock

Assume that Pharoah Corp. earned net income of $3,434,000 during 2021. In addition, it had 102,000 shares of 9%, $100 par nonconvertible, noncumulative preferred stock outstanding for the entire year. Because of liquidity considerations, however, the company did not declare and pay a preferred dividend in 2021. Compute earnings per share for 2018, using the weighted-average number of shares determined in part (a).

Earnings Per Share?

 

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Expert Answer

Step 1

Earnings per share is a financial ratio that represents the value income earned for one share. The portion of company’s earning that is allocated to each share of common stock.

Formula = Income available to equity shareholders ÷ no of shares outstanding

Step 2

Computation of Weighted Average no of shares outstanding

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Computation of shares outstanding No of Total Time Particulars shares Balance period Date 01-01 2021 Opening Bal 140916.67 491000 491000 01-02- 2021 Stock Issued 01-03 2021 Stock Dividend 116000 607000 1 50583.33 109350 49100 656100 2 01-05- 2021 Treasury Stock 96000 560100 46675 01-06- 2021 Stock Split 1680300 2240400 4 746800 01-10- 2021 Re-issue of treasury stock Weighted Average outstanding 59000 574850 2299400 3 no of share 1569175

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Step 3

Working Note: F...

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B P Computation of shares outstanding 1 Time Total Balarperiod 491000 -D3+C4 -D4+C5 =D5-C6 2 Particulars 3 Opening Bal 4 Stock Issued 5 Stock Dividend C3*10% 6 Treasury Stock 96000 7 Stock Split 8 Re-issue of treas|59000 9 Weighted Average no of share outstanding No of shares |D3*E3/12 -D4 E4/12 D5*E5/12 -D6*E6/12 D7*E7/12 =D8*E8/12 =SUM(F3:F8) 491000 1 116000 1 2 1 D6*3 -D6+C7 -D7+C8 4 3

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