As auditor for 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: | |
|
1,285,000 |
|
1,200,000 |
|
1,242,500 |
| Earnings per share: | |
| $3,374,960 | = $2.72 per share |
| 1,242,500 |
You have developed the following additional information.
- There are no other equity securities in addition to the common shares.
- There are no options or warrants outstanding to purchase common shares.
- There are no convertible debt securities.
- Activity in common shares during the year was as follows.
| Outstanding, Jan. 1 | 1,285,000 |
| Treasury shares acquired, Oct. 1 | 1,035,000 |
| Shares reissued, Dec. 1 | 1,165,000 |
| Outstanding, Dec. 31 | 1,200,000 |
Questions: