Question

Ringmeup Inc. had net income of $123,100 for the year ended December 31, 2019. At the beginning of the year, 43,000 shares of common stock were outstanding. On May 1, an additional 18,000 shares were issued. On December 1, the company purchased 4,200 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 5.00%, $100 par value preferred stock that were outstanding the entire year

Calculate basic earnings per share of common stock for the year ended December 31, 2019. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

Calculation of basic earnings per share :

Step 1:

Computation of weighted average number of shares :

Date	shares outstanding	number of months	weighted average shares
Jan 1 to Apr 30	43,000	4/12	14,333.33
May 1 to Nov 30	61,000	7/12	35,583.33
Dec 1 to Dec 31	56,800	1/12	4,733.33
Weighted average number of shares	54,650

Step 2 :

Earnings per share = (net income - preferred dividend) ÷ weighted average number of shares

= ($1,23,100 - 6000 × 100 ×5%) ÷ 54,650

= $93,100 ÷ 54,650

= $1.70