[Anonymous]

Friends, can someone please help me to understand this problem?

At the beginning of the year, Lewis Corporation had 100,000 shares of common stock

outstanding. During the year, the following transactions occurred.

Date Transaction

April 1 Issued 10,000 shares in exchange for land

July 1 Declared and distributed a 10% stock dividend

October 1 Purchased 5,000 shares of treasury stock

The number of shares that Lewis should use when computing earnings per share at the

end of the year is

a. 117,000.

b. 116,000.

c. 111,750.

d. 106,250.

As per my calculation I arrived to117,000, however the answer as per the book is c) 11,750

Am I missing something here??

[scottiet]

You have to you ratios with this problem.

100,000 X 3/12 (.25) = 25

110,000 X 3/12 (.25) = 27.5

121,000 X 3/12 (.25) = 30.25

116,000 X 3/12 (.25) = 29

Add all four together and you get 111,750.

I can't remember exactly but I think if there's a stock split at anytime during the year, you would use that number as your begining shares outstanding.

FAR- 88 2/28/2012
AUD- 88 5/3/2012
REG- 84 7/31/12
BEC- 83 10/19/12

[Anonymous]

Scottiet, can you explain why this problem is treated that way? Based on how I was taught this, I came up with 117,000 as well. Wouldn't the stock dividend apply as of the beginning of the year?

110,000 x 3/12 = 27,500

121,000 x 6/12 = 60,500

116,000 x 3/12 = 29,000

= 117,000

Thanks for your help! 🙂

Edit: I looked it up on investopedia and that site agrees… Stock splits and stock dividends are as of the beginning of the year. I'm pretty sure the answer is 117,000 :/

https://www.investopedia.com/exam-guide/cfa-level-1/financial-ratios/splits-dividends.asp

[Anonymous]

Dave: Are you sure stock dividend should be counted back? I though only stock split should be counted “retroactively”… small dividend less than 20 – 25% should not be counted back? That is the reason I hate FAR…I was doing fine on EPS while studying it, now that I am on chapter 9, I completely forgot how to do it……

[Anonymous]

CPA-Convertible,

Actually that sounds familiar (the “small stock dividend” part), but I cannot find any examples where this method is used. Everywhere I look says that stock dividends are applied as of 1/1 without regard for the amount. Can you link me where that is explained? The investopedia page I linked earlier uses 12% dividend as their example, and cpaclass uses 10%, both following my method… Maybe it is a new rule and I'm outdated?

https://cpaclass.com/gaap/sfas/gaap-sfas-128.htm (scroll to example 2)

Ali, do you remember where you got this question from? Any chance you could contact the author for an explanation?

[scottiet]

I believe you're correct, I'd contact the publisher. Last thing you'd want for studying is unreliable material.

FAR- 88 2/28/2012
AUD- 88 5/3/2012
REG- 84 7/31/12
BEC- 83 10/19/12

[ledgermaven]

I did the problem per Cindy at Yeager's method and the correct answer is what Ali got, 117,000.

Ali, is this in the Wiley book? they often have typos, you have it right so don't worry. This was a good review for me 🙂

100,00 shares beginning of year x 12/12 = 100,000

10,000 x 9/12 = 7,500

stock split, so take 107,500 x 1.1 = 118,250

treasury stock (5000) x 3/12 = (1,250)

total stock: 118,250-1,250 = 117,000

[Anonymous]

Dave, I need to get back to my Becker book for reference. I think you might be right, stock dividends need to be counted back…this is a good review question…hope there are more postings like this.

[Anonymous]

In fact i got bunch of MCQ questions from one of my friends and this is one of those MCQs. I don't have the reference !!

Thank you all for your inputs. I sure that the answer given with this MCQ is wrong so no need to worry.

[q84ever]

hi guys 🙂

how r u all ?

thIs is my first time to apply for the cpa exam through new Hampshire bord coz i met their requirement which is 120 credit?

also i'm from kuwait, so i will take the exam as international , actually i didn;t get any help i just do everything by my self?

so is any one here from new hampshire ?

waiting the NTS Ooops.
Ready to accept the Shock ";Pp
1-FAR, waiting
2-REG, waiting
3-AUD, waiting
4-BEC, waiting

[Anonymous]

@q84ever hi there, I am from Oman-Muscat. I am registered with New Hampshire as well.

I use Roger review material and classes supplemented with Gleim MCQ softerwear.

As u can see, my FAR exam is on Feb 29th as an international candidate.

Do let me know should you need any help ..

Good luck 2 all 🙂

[q84ever]

@ Ali , nice 2 meet u my brother I feel great to heir this news from u .

First of all, good luck in ur exam and I am sure that u will pass, so do well and let's take it my friend and become a CPA 🙂

the problem that I face it is ( I evaluate my transaction with institution in U.S and I ask them to send me the evaluation and I will send it by my-self to the state , so after I received the evaluation I did the application as a first time and I register for one section which is FAR, and I pay online than I send my documents to them through mailing. I call them and the said we got ur application and document give us 2 weeks to send u the NTS, 2 weeks later I call them back ask them for the NTS so they said sorry some document is missing which is the evaluation we need the institution to send it not u so I tell the institution to send for the state a copy)

I was ready to take the FAR on 28 Feb. And I study well but this is the life NO thing comes without difficulties!!!!!

My Questions:

1- how can I add another section which is the RUG. On the NTS before they send it to me?

2- DO u have an E-mail to contact with u Ali or mobile-phone ?

If u don't mind “;Pp

waiting the NTS Ooops.
Ready to accept the Shock ";Pp
1-FAR, waiting
2-REG, waiting
3-AUD, waiting
4-BEC, waiting

[Anonymous]

@q84ever, Thanks for the motivation 🙂

In fact almost same thing happened with me as they misplaced my evaluation. However, it was resent to them and things went smooth thereafter.

Well I am not sure how to add a section to your NTS as I am new to this hassle as well. You are more than welcome to contact me.

My email ID is alijawad_9@yahoo.co.uk

I can share my mobile number with you there it self.

Good luck

[THAER]

Hi

I solved this as follow :

100,000 * 1 = 100,000

10,000 * 9/12 = 7500

11,000 *6/12 = 5,500

5,000 * 3/12 = ( 1250 ) negative

111750

[Author]

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