Question

In: Accounting

Net income $2,350,000, Preferred stock: 52,000 shares outstanding, $100 par, 9% cumulative, not convertible 5,200,000 Common...

Net income $2,350,000, Preferred stock: 52,000 shares outstanding, $100 par, 9% cumulative, not convertible 5,200,000

Common stock: Shares outstanding 1/1 686,400  

Issued for cash, 5/1 270,000   

Acquired treasury stock for cash, 8/1 148,800   

2-for-1 stock split, 10/1

Compute earnings per share:

Solutions

Expert Solution

Answer:

Earnings per share = Net Income after Preference/ Weighted outstanding number of shares

Net Income                                                                                           $ 23,50,000
Less : Preferred Dividends                                                                   $   4,68,000
Net Income after Preference Dividend                                                 $ 18,82,000

Begininng                                                                                                 6,86,400
Issued on 5/1                                           (2,70,000*8/12)                       1,80,000
Less: Acquired treasury stock 8/1           (1,48,800*5/12)                         - 62,000
Total number of stocks                                                                             8,04,400
Add: Stock Split                                                                                        8,04,400
Weighted outstanding number of shares                                                16,08,800

Earnings per share = $ 18,82,000 / 16,08,800 = $ 1.17


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