Blue Bay Logistics Ltd.'s shareholders' equity accounts were as follows at the beginning of the current fiscal year, April 1, 2017:
$1 cumulative preferred shares (78,000 shares issued).....................$1,950,000
Common shares (500,000 shares issued)............................................3,750,000
Retained earnings................................................................................1,500,000
Total shareholders' equity.................................................................$7,200,000
During the year, the following selected transactions occurred:
May 1 Reacquired and retired 12,000 common shares for $11 per share.
June 1 Issued 6,000 common shares for $12 per share.
July 1 Issued 50,000 common shares for $13 per share.
Feb. 28 Declared the annual preferred cash dividend to shareholders of record on March 12, payable on April 1.
Mar. 31 Net income for the year ended March 31, 2018, was $1,016,750.
Instructions
(a) Calculate the weighted average number of common shares for the year.
(b) Calculate the basic earnings per share.
(c) Why is it important to use income available to common shareholders in the calculation of basic earnings per share? Why not just use net income?
(d) Would your answer to part P11.8B(b) change if the preferred share dividend had not been declared on February 28? Explain.