Question

Sarasota Inc. presented the following data.

Net income $2,530,000

Preferred stock: (47,000 shares outstanding, $100 par, 8% cumulative, not convertible) 4,700,000

Common stock: Shares outstanding 1/1 777,600

Issued for cash, 5/1 308,400

Acquired treasury stock for cash, 8/1 146,400

2-for-1 stock split, 10/1

Compute earnings per share.

Answer 1

Solution:
	Earnings per share (EPS)     $	1.17	per share
Working Notes:
			a	b	c	d	e=a x b x c/d
	Event	Dates Outstanding	Shares Outstanding	Stock Split Restatement	No of months	/12 months	Weighted Shares
	Beginning balance	Jan 1 - May 1	777,600	2	4	12	518,400
	Issued shares	May 1 - Aug 1.	1,086,000	2	3	12	543,000
			[777,600+308,400]
	Reacquired shares	Aug 1 - Oct 1	939,600	2	2	12	313,200
			[1086,000-146,400]
	Stock split	Oct 1 - Dec 31	1,879,200	1	3	12	469,800
			[939,600 x 2]
				Weighted-average number of shares outstanding			1,844,400
	Earnings per share (EPS) =(Net Income - Preferred Dividends)/Weighted-average number of shares outstanding
	Earnings per share (EPS) =($2,530,000 -(4,700,000 x 8% ))/1,844,400
	Earnings per share (EPS) =($2,530,000 -376,000)/1,844,400
	Earnings per share (EPS) =1.167859466
	Earnings per share (EPS) =1.17
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