[Akula]

Hello all, I cannot seem to understand the logic of this question.

The following information pertains to Jet Corp’s outstanding stock for Y2:

Common Stock, $5 par value:

Shares outstanding 1/1, Y2 = 20,000

2 for 1 split, 4/1 Y2 = 20,000

Shares issued, 7/1 Y2 = 10,000

Preferred Stock, $10 par value, 5% cumulative

Shares outstanding, 1/1 Y2 = 4,000

What are the number of shares jet should use to calculate Y2 EPS?

A) 40k (my choice)
B) 54k
C) 50k
D) 45K (Correct)

For the life of me i do not understand why in the world we multiply the stock split that happened after 3 months by 6/12. Are stock splits not part of EPS?

because my logic is the way the book did it.

20k *12/12
20k *9/12
10k *6/12
= 40k

I dont know why I do not understand this logic but if someone could please help it would be greatly appreciated

[Akula]

ok, ok I think i figured out why I am an idiot, it may be the 16 hours of MCQ or it may be the lack of sleep

but their explanation in becker made no sense, and i mean they could have done a much better job, but w.e.

To anyone reading this as tired or just not understanding the question,

Remember stock splits are retro active, just like stock dividends. So if you were to take
40k *12/12
and 10k * 6/12

there is the 45k

I thank this entire community for all that you do!

[Sweet<3 soon to be CPA]

16 hours!!!! OMG that is dedication 🙂

[Akula]

what did you see the most of on the FAR exam?

[Author]

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