Question

Indigo Inc. presented the following data. Net income $2,670,000 Preferred stock: 55,000 shares outstanding, $100 par,...

Indigo Inc. presented the following data.

Net income $2,670,000
Preferred stock: 55,000 shares outstanding, $100 par, 8% cumulative, not convertible 5,500,000
Common stock: Shares outstanding 1/1 822,000
   Issued for cash, 5/1 302,400
   Acquired treasury stock for cash, 8/1 162,000

   2-for-1 stock split, 10/1

What is earnings per share?

Homework Answers

Answer #1
Event period Shares outstanding[A] stock split reinstatement[B] Number of months[C] /12 months[D] Weighted average number of shares[A*B*C*D]
Beginning 1/1 -1/5 822000 2 4 /12 548000
issued shares 1/5 - 1/8 822000+302400=1124400 2 3 /12 562200
reacquired 1/8-1/10 1124400-162000= 962400 2 2 /12 320800
stock split 1/10-31/12 962400*2= 1924800 1 3 /12 481200
1912200

Earning per share =Net Income -preferred dividend ]weighted average number of shares outstanding

      =[2670000- 440000]/1912200

       = 2230000/1912200

      = $ 1.17 per share

**preferred dividend :5500000*.08 = 440000

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