Question

Ringmeup Inc. had net income of $196,600 for the year ended December 31, 2019. At the beginning of the year, 41,000 shares of common stock were outstanding. On May 1, an additional 17,000 shares were issued. On December 1, the company purchased 4,800 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 4.10%, $100 par value preferred stock that were outstanding the entire year.

Answer 1

Answer:

Calculation of basic earning per share for the year ended December 31, 2019, as follows:

Earning per share =(Net income - Dividend) / Number of shares outstanding during the year

   ={$196,000 - (6,000 shares x $100 x 4.10%) / 51,933 shares

   = $171,400 / 51,933 shares

= 3.30 per share

Therefore, basic earning per share for ther year ended 2019 is $3.30 per share.

Working Note:

Calculation of the weighted average number of shares outstanding during the year as follows:

Particulars	No. of Shares
Number of shares outstanding at the beginning of the year	41,000
Add: Additional shares issued on May 1 (17,000 shares x 8/12)	11,333
Less: Purchase of own common stock on December 1 (4,800 shares x 1/12)	(400)
Number of shares outstanding during the year	51,933