Question

Backhome Company’s net income for 2020 is $650,000, and 86,000 shares of common were issued and...

Backhome Company’s net income for 2020 is $650,000, and 86,000 shares of common were issued and outstanding as of January 1, 2020. On June 30, 2020, the company repurchased 20,000 of its shares for $25 each. The only potentially dilutive securities outstanding were 25,000 executive stock options issued during 2019, each exercisable for one share at $20.50; none of these have been exercised. The average market price of Backhome’s stock during 2020 was $26.

Instructions

a) Compute basic earnings per share as it should be shown on the income statement. Show all calculations.

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Answer #1

Basic EPS Formula is Net Income LEss Dividend paid to PReference Share Holders Divided by Weighted Avg No. of SHares.

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