Weighted-Average Common Shares Outstanding Information Provided: Common Shares Balance at the beginning of the year 5,000,000 shares On July 1, the company sold an additional 8,000,000 shares Explain how weighted-average common shares outstanding is calculated. Explain why (walk through the calculation) the weighted-average common shares outstanding based on the information above is 9 million shares. Explain why preferred shares are excluded when determining weighted-average common shares outstanding. Why are preferred dividends subtracted out of net income when determining EPS?
Weighted-Average Common Shares Outstanding Information Provided: Common Shares Balance at the beginning of the year 5,000,000 shares On July 1, the company sold an additional 8,000,000 shares Explain how weighted-average common shares outstanding is calculated. Explain why (walk through the calculation) the weighted-average common shares outstanding based on the information above is 9 million shares. Explain why preferred shares are excluded when determining weighted-average common shares outstanding. Why are preferred dividends subtracted out of net income when determining EPS?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
4.Weighted-Average Common Shares Outstanding
Information Provided:
Common Shares
Balance at the beginning of the year
5,000,000
shares
On July 1, the company sold an additional
8,000,000
shares
Explain how weighted-average common shares outstanding is calculated. Explain why (walk
through the calculation) the weighted-average common shares outstanding based on the
information above is 9 million shares.
Explain why preferred shares are excluded when determining weighted-average common shares
outstanding.
Why are preferred dividends subtracted out of net income when determining EPS?
Why are preferred dividends only subtracted from income from continuing operations and not
also subtracted out

Transcribed Image Text:How does the accountant know that the Retained Earnings balance of $25 million is the balance
as of the beginning of the year?
Using the balances provided above, how could a quick addition/subtraction exercise on your
calculator provide net income?
• How could the accountant calculate ending retained earnings without preparing the retained
earnings statement?
• Explain the closing process utilizing the income summary account. Provide "T" accounts in your
explanation along with the journal entries.
2. Retained Earnings Statement (use the same financial information tied to your closing entries
instruction manual)
Explain what the retained earnings statement calculates.
Explain why dividends are only included in the retained earnings statement.
Note: One of the errors in last months financials was the double counting of dividends (included
in the retained earnings statement as well as the stockholders' equity section).
3. Year-end Adjustments
Explain and provide examples of year-end adjustments. Include in your instructions the
following example. What is the year-end adjustment accomplishing? Why is it necessary? What
would the income statement impact be if the adjustment was not made? What is the balance
sheet impact if the adjustment is not made? Include an explanation for the interest expense
calculation.
Date
Description
Airflowing Corp. purchased a truck for
The sales agreement callfor Airflowing Corp. to pay
note for the remaining balance of the purchase price.
from Ford Motor Company Fleet Sales Division.
on purchase date and to sign a 1-year,
June 1, 2022
24
85,000
2$
10,000
10%
Debit
Credit
6/1/22
Truck
$ 85,000
Notes payable
2$
75,000
Cash
10,000
12/31/22
Interest expense
$
4,375
Year-end adjustment
Interest payable
2$
4,375

Transcribed Image Text:Scenario: You were recently hired by a $35 million manufacturing company ($35 million in sales) as the
company staff accountant. The controller (your boss) has asked you to explain several accounting
practices to the two existing members of the accounting staff. The four areas the controller wants you to
explain to the staff include,
Closing entries
• Retained Earnings Statement
• Year-end Adjustments
• Weighted-Average Common Shares Outstanding
Note: The previous months financial statements (prepared just before you were hired) were incorrect.
The Controller did not catch the errors before the incorrect financials were presented to the President.
The Controller has become heavily involved in company operations (hoping to become the Chief
Operating Officer) and does not have the time to carry out all the accounting responsibilities. It became
clear last month that the company needed to hire an accountant with a four-year accounting degree
(you).
Required: Prepare a clearly written set of instructions for each of the four areas the controller wants you
to explain. The controller has provided some baseline information for you to incorporate into your
instructions. You will be evaluated on how clear and complete the instructions are presented. The goal
is for the accounting staff to fully understand the accounting (how and why) after reading your
instructions.
1. Closing entries
NashvilleNets Inc.
Adjusted Trial Balance
December 31, 2018
Debit
Credit
Common Stock, Par
2$
0. 10
1,000,000
APIC (Additional Paid in Capital in Excess of Par)
Retained Earnings
9,000,000
25,000,000
Dividends Paid
$
2,400,000
Sales
105,350,000
Sales Discounts
1,250,000
Cost of Goods Sold (COGS)
41,950,000
Selling Expenses
24
14,150,000
Administrative Expenses
3,340,000
Rent Revenue
120,000
Loss on sale of equipment
$
50,000
Income Tax Expense
2$
21,580,000
Items to incorporate into your instruction manual for closing entries (including the partial trial balance
provided above) are as follows:
1
Expert Solution

This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps

Recommended textbooks for you


Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,

Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,


Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,

Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON

Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education

Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education