4.Weighted-Average Common Shares OutstandingInformation Provided:Common SharesBalance at the beginning of the year5,000,000sharesOn July 1, the company sold an additional8,000,000sharesExplain how weighted-average common shares outstanding is calculated. Explain why (walkthrough the calculation) the weighted-average common shares outstanding based on theinformation above is 9 million shares.Explain why preferred shares are excluded when determining weighted-average common sharesoutstanding.Why are preferred dividends subtracted out of net income when determining EPS?Why are preferred dividends only subtracted from income from continuing operations and notalso subtracted out How does the accountant know that the Retained Earnings balance of $25 million is the balanceas of the beginning of the year?Using the balances provided above, how could a quick addition/subtraction exercise on yourcalculator provide net income?• How could the accountant calculate ending retained earnings without preparing the retainedearnings statement?• Explain the closing process utilizing the income summary account. Provide "T" accounts in yourexplanation along with the journal entries.2. Retained Earnings Statement (use the same financial information tied to your closing entriesinstruction manual)Explain what the retained earnings statement calculates.Explain why dividends are only included in the retained earnings statement.Note: One of the errors in last months financials was the double counting of dividends (includedin the retained earnings statement as well as the stockholders' equity section).3. Year-end AdjustmentsExplain and provide examples of year-end adjustments. Include in your instructions thefollowing example. What is the year-end adjustment accomplishing? Why is it necessary? Whatwould the income statement impact be if the adjustment was not made? What is the balancesheet impact if the adjustment is not made? Include an explanation for the interest expensecalculation.DateDescriptionAirflowing Corp. purchased a truck forThe sales agreement callfor Airflowing Corp. to paynote for the remaining balance of the purchase price.from Ford Motor Company Fleet Sales Division.on purchase date and to sign a 1-year,June 1, 20222485,0002$10,00010%DebitCredit6/1/22Truck$ 85,000Notes payable2$75,000Cash10,00012/31/22Interest expense$4,375Year-end adjustmentInterest payable2$4,375 Scenario: You were recently hired by a $35 million manufacturing company ($35 million in sales) as thecompany staff accountant. The controller (your boss) has asked you to explain several accountingpractices to the two existing members of the accounting staff. The four areas the controller wants you toexplain to the staff include,Closing entries• Retained Earnings Statement• Year-end Adjustments• Weighted-Average Common Shares OutstandingNote: The previous months financial statements (prepared just before you were hired) were incorrect.The Controller did not catch the errors before the incorrect financials were presented to the President.The Controller has become heavily involved in company operations (hoping to become the ChiefOperating Officer) and does not have the time to carry out all the accounting responsibilities. It becameclear last month that the company needed to hire an accountant with a four-year accounting degree(you).Required: Prepare a clearly written set of instructions for each of the four areas the controller wants youto explain. The controller has provided some baseline information for you to incorporate into yourinstructions. You will be evaluated on how clear and complete the instructions are presented. The goalis for the accounting staff to fully understand the accounting (how and why) after reading yourinstructions.1. Closing entriesNashvilleNets Inc.Adjusted Trial BalanceDecember 31, 2018DebitCreditCommon Stock, Par2$0. 101,000,000APIC (Additional Paid in Capital in Excess of Par)Retained Earnings9,000,00025,000,000Dividends Paid$2,400,000Sales105,350,000Sales Discounts1,250,000Cost of Goods Sold (COGS)41,950,000Selling Expenses2414,150,000Administrative Expenses3,340,000Rent Revenue120,000Loss on sale of equipment$50,000Income Tax Expense2$21,580,000Items to incorporate into your instruction manual for closing entries (including the partial trial balanceprovided above) are as follows:1

The question is based on the concept of financial accounting. As per the Bartleby guidelines we are…

Answered: Weighted-Average Common Shares…

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q