Question

Ringmeup Inc. had net income of $142,100 for the year ended December 31, 2019. At the...

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 ?

Homework Answers

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

Feel free to ask any clarification, if required. Kindly provide feedback by thumbs up, if satisfied. It will be highly appreciated. Thank you

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