Question

Ringmeup, Inc., had net income of $137,200 for the year ended December 31, 2016. At the beginning of the year, 39,000 shares of common stock were outstanding. On May 1, an additional 16,000 shares were issued. On December 1, the company purchased 4,700 shares of its own common stock and held them as treasury stock until the end of the year. No other changes in common shares outstanding occurred during the year. During the year, Ringmeup, Inc., paid the annual dividend on the 9,000 shares of 3.65%, $100 par value preferred stock that were outstanding the entire year.

Required:

Calculate basic earnings per share of common stock for the year ended December 31, 2016

Answer 1

Computation of weighted number of shares:
		weighting factor (number of months / total months)	weighted number of shares
opening outstanding	39,000	12/12	39,000.00
additional shares	16,000	08/12	10,666.67
treasury stock	-4700	01/12	(391.67)
		Total weighted shares	49,275.00

Computation of Basic Earnig Per Share
Net income	$137,200
Less: preference dividend (9000 * $100 *3.65%)	($32,850)
net income available for common shares	$104,350
basic earnings per share (net income availabe / weighted number of shares) ($104350 /49275)	$2.12