Question

The following information is related to Tobey Corporation for 2020:
 Net Income: $2,500,000
 Common Stock Activities
1/1/20: 700,000 common shares outstanding
3/1/20: Purchased 60,000 treasury shares
7/1/20: 3-for-1 stock split
11/1/20: 120,000 new shares issued for cash
 8% Cumulative Preferred Stock
10,000 shares at $100 par
Required
a. Compute weighted average common shares outstanding (WACSO) for 2020.
b. Compute basic earnings per share for 2020. (Round to no fewer than four decimal places.)

Answer 1

1) Weighted average common shares outstanding (WASCO) for 2020.

Calculations -

Calculations of Weights-

2. Compute basic earnings per share for 2020

Basic Earning per Share = (Net Income - Preferred Dividend ) / Weighted average common shares outstanding

Basic Earning per Share = (2500000 - 80000) / 1310000

                                           = 2420000/1310000

                                           = 1.85

Calcualtions for Preference Dividend = (10000*100)*8% =80000