Question

On December 31, 2020, Jackson Company had 100,000 shares of common stock outstanding and 28,000 shares...

On December 31, 2020, Jackson Company had 100,000 shares of common stock outstanding and 28,000 shares of 6%, $50 par, cumulative preferred stock outstanding. On February 28, 2021, Jackson purchased 22,000 shares of common stock on the open market as treasury stock for $33 per share. Jackson sold 5,800 treasury shares on September 30, 2021, for $35 per share. Net income for 2021 was $178,905. Also outstanding during the year were fully vested incentive stock options giving key executives the option to buy 48,000 common shares at $38. The market price of the common shares averaged $37 during 2021.

Required:
Compute Jackson's basic and diluted earnings per share for 2021. (Round your answers to 2 decimal places.)

Earnings per share
Basic
Diluted
Business   Accounting   
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Homework Answers

Answer #1

1.

Basic Earnings per share = Net Income - Preferred Dividend / Weighted Average Common shares outstanding

Net Income = 178905

Prefrence dividend = (28000 x 50) x 6% = 84000

Weighted Average Common shares outstanding = 100000 - (22000 x 10/12) + 5800 x 3/12 = 100000 - 18333.33 + 1450 = 81116.67

= (178905 - 84000) / 81116.67 = 94905 / 81116.67 = 1.17

Basic Earning Per Share = 1.17

2.

First same as above

Weighted Average Common stock  = 100000 - (22000 x 10/12) + (5800 x 3/12) + (48000 - 49297.3)

= 100000 - 18333.33 + 1450 - 1297.30 = 81819.37

Net Income - Preferred Dividend / Weighted Average Common shares outstanding

94905 / 81819.37 = 1.16

Dillued Earning per share = 1.16

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