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cpa2010
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| Posted: 03 May 2010 at 17:16 | IP Logged
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Strauch Co. has one class of common stock outstanding and no other securities that are potentially convertible into common stock. During 1989, 100,000 shares of common stock were outstanding. In 1990, two distributions of additional common shares occurred: On April 1, 20,000 shares of treasury stock were sold, and on July 1, a 2-for-1 stock split was issued. Net income was $410,000 in 1990 and $350,000 in 1989. What amounts should Strauch report as earnings per share in its 1990 and 1989 comparative income statements?
1990 &n bsp; 1989
a. $1.78 & nbsp; $3.50
b. $1.78 & nbsp; $1.75
c. $2.34 & nbsp; $1.75
d. $2.34 & nbsp; $3.50
ans is b
can somebody pls explain the calcualtion of WACSO part i.e shares outstanding in simple words..........thanks in advance
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gottobecpa
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| Posted: 03 May 2010 at 17:38 | IP Logged
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you figure out how many shares were owned for what period,
this is the simplest explanation
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gottobecpa
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| Posted: 03 May 2010 at 17:40 | IP Logged
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Also the above question has been solved on this forum before, just use the search option
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16-April-10-FARE-77!
29-May-10-AUD-81!
7-Aug-10-REG-76!
31-Aug-10-BEC-87 (unbelievable because studied the least for this, 15 days)
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Alex2008
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| Posted: 03 May 2010 at 18:14 | IP Logged
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For the 1989 you have to make an adjustment for the 1990 stock split because the company is presenting comparative F/S.
So in 1989 you have 200,000 shares (100,000, 2 for 1 split).
EPS = $350,000/200,000 = $1.75
For the 1990 you begin the year with 100,000 and then the company sold 20,000 treasury stocks in April. And then you have the 2 for 1 stock split in July.
So you have stocks from January to April = 200,000 (100,000 2 for 1 split), and stocks from April to December = 240,000 (100,000 + 20,000 2 for 1 split)
To get the weighted average shares outstanding you do the following calculations:
January to April outstanding stocks = 200,000 3/12 = 50,000
April to December outstanding stocks = 240,000 9/12 = 180,000
Total = 230,000
EPS = $410,000 / 230,000 = $1.78
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cpa2010
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| Posted: 04 May 2010 at 14:39 | IP Logged
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Hey ALex,
I was thinking treasury stock would be deducted from os stock and do stock split also apply to tresury stock?....m confused .........sorry to ask
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Topic: Earning per share-WACSO calculation
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