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
the CSU-Global Guide to Writing and APA Requirements 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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