Question 1) At the start of its 2021 fiscal year (January 1, 2021), Liberia Incorporated noted that there were 200,000, $1 noncumulative preferred shares worth $3,000,000. There were also 400,000 common shares outstanding worth $4,000,000. Opening retained earnings was $5,000,000. The following transactions happened in fiscal 2021: • February 1: Bought back 40,000 common shares at $15/share. • June 1: Issued 75,000 common shares for $28/share • August 1: Issued 25,000 common shares for $30/share. • August 15: Declared preferred cash dividends of $400,000 to shareholders on record on August 28. Net income on August 15 was $1,750,000. • September 1: Paid cash dividends declared on August 15. • November 1: Issued 10,000 common shares for $32/share. • December 1: Bought back 25,000 common shares at $25/share. As of December 31, 2021, net income was $3,250,000. Required: a) Compute the weighted average number of common shares for fiscal 2021. b) Compute the basic EPS for fiscal 2021. c) Compute the payout ratio for the cash dividends paid during the year.
Question 1) At the start of its 2021 fiscal year (January 1, 2021), Liberia Incorporated noted that there were 200,000, $1 noncumulative
The following transactions happened in fiscal 2021:
• February 1: Bought back 40,000 common shares at $15/share.
• June 1: Issued 75,000 common shares for $28/share
• August 1: Issued 25,000 common shares for $30/share.
• August 15: Declared preferred cash dividends of $400,000 to shareholders on record on August 28. Net income on August 15 was $1,750,000.
• September 1: Paid cash dividends declared on August 15.
• November 1: Issued 10,000 common shares for $32/share.
• December 1: Bought back 25,000 common shares at $25/share.
As of December 31, 2021, net income was $3,250,000.
Required:
a) Compute the weighted average number of common shares for fiscal 2021.
b) Compute the basic EPS for fiscal 2021.
c) Compute the payout ratio for the cash dividends paid during the year.
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