During 2011, Arthur Corportation reported a net income of $3,059,000. On January 1, Arthur had 2,800,000 shares of common stock outstanding. The company issued an additional 1,680,000 shares of common stock on October 1. In 2011, the company had a simple capital structure. During 2012, there were no transactions involving common stock, and the company reported net income of $4,032,000. 1. Determine the weighted-average number of common shares outstanding each year. 2. Compute earnings per shre for each year. Solution Answer : 1. weighted-average number of common shares outstanding each year. Note : = (3/4 * 2,800,000) +(1/4 *1,680,000) = 2,100,000 + 420,000 = 2,520,000 In year 2012 new shares are not purchased hence (Opening balance * 1) = 4,480,000 2. earnings per shre for each year Note : earnings per share = Net Income / Weighted Average No of outstanding shares .

1. During 2011, Arthur Corportation reported a net income of $3,059,000. On January 1, Arthur
had 2,800,000 shares of common stock outstanding. The company issued an additional 1,680,000
shares of common stock on October 1. In 2011, the company had a simple capital structure.
During 2012, there were no transactions involving common stock, and the company reported net
income of $4,032,000.
1. Determine the weighted-average number of common shares outstanding each year.
2. Compute earnings per shre for each year.
Solution
Answer :
1. weighted-average number of common shares outstanding each year.
Note :
= (3/4 * 2,800,000) +(1/4 *1,680,000) = 2,100,000 + 420,000 = 2,520,000
In year 2012 new shares are not purchased hence (Opening balance * 1) = 4,480,000
2. earnings per shre for each year
Note :
earnings per share = Net Income / Weighted Average No of outstanding shares
Particulars 2011 2012
No of shares 2,800,000
additional shares issued 1,680,000
Total common Stock 4,480,000 4,480,000
Weighted average no of coomon stock outstanding 2,520,000 4,480,000