Question

Metlock Inc. presented the following data.

Net income		$2,470,000
Preferred stock: 52,000 shares outstanding, $100 par, 8% cumulative, not convertible		5,200,000
Common stock: Shares outstanding 1/1		736,800
Issued for cash, 5/1		315,600
Acquired treasury stock for cash, 8/1		134,400
2-for-1 stock split, 10/1

Compute earnings per share.

Answer 1

Earnings Per Share = Net Income available to common shareholders / Weighted average common shares outstanding

Net Income available to common shareholders

Net Income available to common shareholders = Net Income – Preferred Dividend

= $24,70,000 – [$52,00,000 x 8%]

= $24,70,000 – 416,000

= $20,54,000

Weighted average common shares outstanding

Weighted average common shares outstanding = [736,800 x 4/12 x 2] + [10,52,400 x 3/12 x 2] + [918,000 x 5/12 x 2]

= 4,91,200 + 5,26,200 + 7,65,000

= 17,82,400 Shares

Therefore, Earnings Per Share0

= $20,54,000 / 17,82,400 Shares

= $1.15 per share