Dilutive Securities and Earnings per Share, accounting homework help

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Respond to the following. Submit journal entries in a table in MS
Word and written segments in the same Word document. Do not submit two
separate documents, as only one document can be accepted. For written
answers, please make sure your responses are well written, formatted per APA REQIREMENTS and have proper citations, if applicable.

As one of the auditors at Banquo & Associates, you have been
assigned to check Duncan Corporation’s computation of earnings per share
for the current year. The controller, Mac Beth, has supplied you with
the following computations.

Net income

$3,374,960

Common shares
issued and outstanding:

Beginning of year

1,285,000

End of year

1,200,000

Average

1,242,500

Earnings per share:

$3,374,960

= $2.72 per share

1,242,500

You have developed the following additional information.

  1. There are no other equity securities in addition to the common shares.
  2. There are no options or warrants outstanding to purchase common shares.
  3. There are no convertible debt securities.

Activities in common shares during the year were as follows.

Outstanding, Jan. 1

1,285,000

Treasury shares acquired, Oct. 1

250,000

Shares reissued, Dec. 1

165,000

Outstanding, Dec. 31

1,200,000

Questions:

  1. On the basis of the information above, do you agree with the
    controller’s computation of earnings per share for the year? If you
    disagree, prepare a revised computation of earnings per share.
  2. Assume the same facts as
    those presented above, except that options had been issued to purchase
    140,000 shares of common stock at $10 per share. These options were
    outstanding at the beginning of the year, and none had been exercised or
    canceled during the year. The average market price of the common shares
    during the year was $25, and the ending market price was $35. What
    earnings per share amounts will be reported?
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