Sugarland Industries reported a net income of $820,750 on December 31, 2018. At the beginning of...

Sugarland Industries reported a net income of $820,750 on December 31, 2018. At the beginning of the year, the company had 570,000 common shares outstanding. On April 1, the company sold 31,200 shares for cash. On August 31, the company issued 56,400 additional shares as part of a merger.

Required: Compute Sugarland's net income that would produce a basic EPS of $2.35 per share for 2018.

Expert Solution

Working

	No. of shares	Cumulative no. of shares	Period they remain outstanding	Weighted Average no. of shares outstanding
Beginning	570,000	570,000	1 Jan - 31 Mar = 3 months	142,500
1 April issue	31,200	601,200	1 Apr - 31 Aug = 5 months	250,500
31 Aug Issue	56,400	657,600	1 Sept - 31 Dec = 4 months	219,200
Total Weighted Average no. of common stock shares outstanding				612,200

Earnings per share = Net Income / Weighted average shares outstanding.
Requirement: Net Income required for an EPS of $ 2.35
Answer calculation:
Net Income required = Earnings per share desired x Weighted Average no. of common shares outstanding
= $ 2.35 x 612,200 shares
= $ 1,438,670 =Net Income = Answer

ekkarill92 answered 1 year ago

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