Question

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?

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