At January 1, 2017, Bonita Company’s outstanding shares included the following. 259,000 shares of $50 par...

At January 1, 2017, Bonita Company’s outstanding shares included the following.

259,000 shares of $50 par value, 7% cumulative preferred stock
974,000 shares of $1 par value common stock

Net income for 2017 was $2,570,000. No cash dividends were declared or paid during 2017. On February 15, 2018, however, all preferred dividends in arrears were paid, together with a 5% stock dividend on common shares. There were no dividends in arrears prior to 2017.

On April 1, 2017, 454,000 shares of common stock were sold for $10 per share, and on October 1, 2017, 112,000 shares of common stock were purchased for $21 per share and held as treasury stock.

Compute earnings per share for 2017. Assume that financial statements for 2017 were issued in March 2018. (Round answer to 2 decimal places, e.g. $2.55.)

Earnings per share $_____________________

Solutions

Expert Solution

	Calculation of Weighted average number of shares outstanding

	Event	Dates outstanding	Shares outstanding	Fraction of year	Weighted shares

	Beginning balance	Jan. 1–April 1	974,000	3/12	243,500
	Issued shares	April 1–Oct. 1	1,428,000	6/12	714,000
	Reacquired shares	Oct. 1–Dec. 31	1,316,000	3/12	329,000

	Weighted average number of shares outstanding—unadjusted				1,286,500

	Stock dividend, 2/15/18				1.05

A	Weighted average number of shares outstanding—adjusted				1,350,825

	Net income				2,570,000
	Less : Preferred dividend (259,000507%)				(906,500)
B	Profit available to common shareholders				1,663,500

	Earnings per share for 2017 = (B/A) = (1,663,500/1,350,825) = $1.23

ekkarill92 answered 1 year ago

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