Question

Riverbed Inc. presented the following data. Net income $2,670,000 Preferred stock: 46,000 shares outstanding, $100 par,...

Riverbed Inc. presented the following data.

Net income $2,670,000
Preferred stock: 46,000 shares outstanding, $100 par, 8% cumulative, not convertible 4,600,000
Common stock: Shares outstanding 1/1 789,600
   Issued for cash, 5/1 307,200
   Acquired treasury stock for cash, 8/1 136,800
   2-for-1 stock split, 10/1


Compute earnings per share. (Round answer to 2 decimal places, e.g. $2.55.)

Earnings per share

$enter earnings per share rounded to 2 decimal places  

Homework Answers

Answer #1

Stock dividends, Stock splits or Stock subscriptions (retroactively adjusted) - Shares are treated as if they had always been outstanding and included at full amount for current year.

1/1 Shares outstanding 789,600
5/1 Shares issued 204,800 (307,200*8/12)
8/1 Treasury stock acquired (57,000) (136,800*5/12)
10/1 Stock spilt 1,874,800 [(789,600+204,800-57,000)*2]

Weighted average number of common stock outstanding = 1,874,800

Preferred stock dividends = $4,600,000 * 8%

= $368,000

Earnings per share = (Net Income - Preferred stock dividends) / Weighted average number of common stock outstanding  

= ($2,670,000 - $368,000) / 1,874,800

= $1.23

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