Reference no: EM132864969

Question - Metlock Corporation is preparing the comparative financial statements for the annual report to its shareholders for fiscal years ended May 31, 2020, and May 31, 2021. The income from operations for the fiscal year ended May 31, 2020, was $1,793,000 and income from continuing operations for the fiscal year ended May 31, 2021, was $2,412,000. In both years, the company incurred a 10% interest expense on $2,393,000 of debt, an obligation that requires interest-only payments for 5 years. The company experienced a loss from discontinued operations of $614,000 on February 2021. The company uses a 20% effective tax rate for income taxes.

The capital structure of Metlock Corporation on June 1, 2019, consisted of 971,000 shares of common stock outstanding and 20,500 shares of $50 par value, 6%, cumulative preferred stock. There were no preferred dividends in arrears, and the company had not issued any convertible securities, options, or warrants.

On October 1, 2019, Metlock sold an additional 510,000 shares of the common stock at $20 per share. Metlock distributed a 20% stock dividend on the common shares outstanding on January 1, 2020. On December 1, 2020, Metlock was able to sell an additional 764,000 shares of the common stock at $22 per share. These were the only common stock transactions that occurred during the two fiscal years.

Required -

1. Determine the weighted-average number of shares that Metlock Corporation would use in calculating earnings per share for the fiscal year ended.

2. Prepare, in good form, a comparative income statement, beginning with income from operations, for Metlock Corporation for the fiscal years ended May 31, 2020, and May 31, 2021. This statement will be included in Metlock's annual report and should display the appropriate earnings per share presentations.