Question

Ringmeup Inc. had net income of $142,100 for the year ended December 31, 2019. At the beginning of the year, 36,000 shares of common stock were outstanding. On May 1, an additional 17,000 shares were issued. On December 1, the company purchased 4,900 shares of its own common stock and held them as treasury stock until the end of the year. No other changes in common shares outstanding occurred during the year. During the year, Ringmeup paid the annual dividend on the 6,000 shares of 4.90%, $100 par value preferred stock that were outstanding the entire year.

Required:
Calculate basic earnings per share of common stock for the year ended December 31, 2019. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

What are the Earnings Per Share ?

Answer 1

Solution:

Computation of weighted average outstanding shares For year ended
Particulars	Outstanding shares	Period Outstanding	Weighted average Nos of shares
Beginning balance	36000	12	36000
Additional stock issued on 01.05.2019	17000	8	11,333.33
Treasury stock	-4900	1	-408.33
Weighed average outstanding shares for year ended Dec 31, 2019			46925

Basic earning per share = (net income - Preferred dividend) / Weighted average outstanding shares

= ($142100 - 6000*$100*4.90%) / 46925 = $2.40per share

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