Question:
Agassi Corporation is preparing the comparative financial statements to be included in the annual report to stockholders. Agassi employs a fiscal year ending May 31.
Income from operations before income taxes for Agassi was $1,489,000 and $664,200, respectively, for fiscal years ended May 31, 2015 and 2014. Agassi experienced an extraordinary loss of $416,400 because of an earthquake on March 3, 2015. A 40% combined income tax rate pertains to any and all of Agassi Corporation's profits, gains, and losses.
Agassi's capital structure consists of preferred stock and common stock. The company has not issued any convertible securities or warrants and there are no outstanding stock options.
Agassi issued 49,900 shares of $100 par value, 5% cumulative preferred stock in 2011. All of this stock is outstanding, and no preferred dividends are in arrears.
There were 1,376,400 shares of $1 par common stock outstanding on June 1, 2013. On September 1, 2013, Agassi sold an additional 470,400 shares of the common stock at $16 per share. Agassi distributed a 25% stock dividend on the common shares outstanding on December 1, 2014. These were the only common stock transactions during the past 2 fiscal years.
(a) Determine the weighted-average number of common shares that would be used in computing earnings per share on the current comparative income statement for:
| Weighted-average number of common shares |
| (1) |
The year ended May 31, 2014. |
| (2) |
The year ended May 31, 2015. |