Loretta Corporation, a publicly-traded company, is preparing the comparative financial statements to be included in the annual report to shareholders

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Loretta Corporation, a publicly-traded company, is preparing the comparative financial statements to be included in the annual report to shareholders. Sunland's fiscal year ends May 31. The following information is available.

 

1)Income from operations before income tax for Loretta was $1,400,000 and $1,800,000, respectively, for the fiscal years ended May 31, 2021, and 2020.2. Loretta experienced a loss from discontinued operations of $600,000 from a business segment disposed of on March 3, 2021.3. A 20% combined income tax rate applies to all of Loretta Corporation's profits, gains, and losses.4. Loretta's capital structure consists of preferred shares and common shares. The company has not issued any convertible securities or warrants and there are no outstanding stock options.5.Sunland issued 157,000 of $10 par value, 5% cumulative preferred shares in 2013. All of these shares are outstanding, and no preferred dividends are in arrears.6.There were 1.50 million common shares outstanding on June 1, 2019. On September 1, 2019, Loretta sold an additional 400,000 common shares at $18 per share. Loretta distributed a 20% stock dividend on the common shares outstanding on December 1, 2020.7. These were the only common share transactions during the past two fiscal years.

 

a) Determine the weighted average number of common shares that would be used in calculating earnings per share on the current comparative income statement for:

1)The year ended May 31, 2021

2)The year ended May 31, 2020

 

b)Prepare a comparative income statement for the years ended May 31, 2021, and 2020. Assume that Loretta discloses all applicable earnings per share data on the face of the income statement.