Question

Riverbed Inc. presented the following data.

Net income		$2,340,000
Preferred stock: 52,000 shares outstanding, $100 par, 8% cumulative, not convertible		5,200,000
Common stock: Shares outstanding 1/1		816,000
Issued for cash, 5/1		322,800
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

Answer 1

Answer:-The basic earnings per share is=$0.99 per share.

Explanation-

Basic Earning per Share- Net Income – Preferred Dividends / Weighted Average number of Common shares outstanding

={$2340000 –($5200000*8%)}/1948400 shares

= $1924000/1948400 shares

=$0.99 per share

Where-

Calculation of Weighted Average no. of shares outstanding
Event	Dates Outstanding	Shares Outstanding	Stock Split Restatement	No. of months	divided by 12 months	Weighted Shares
Beginning balance	Jan 1- May 1	816000	2	4 Months	12 Months	544000
Issued shares	May 1-Aug 1	1138800	2	3 Months	12 Months	569400
Reaquired shares	Aug 1-Oct 1	1002000	2	2 Months	12 Months	334000
Stock Split	Oct 1-Dec 31	2004000	1	3 Months	12 Months	501000
Weighted Average no. of shares outstanding						1948400