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16 January, 12:59

Paul Corporation reported net income of $260,000 during the current calendar year. The company had 10,000 common shares outstanding on January 1 and sold an additional 6,000 shares on July 1. What is the company's basic EPS? (Round your answer to 2 decimal places.)

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  1. 16 January, 15:39
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    The formula for eps is net income / Average no of shares.

    The net income for the company is 260,000

    In order to find the average no of shares we need to find the weightage of the no of shares as to how many months of the year were the shares outstanding.

    So the company had 10,000 shares from the beginning of year till the end of the year so its weightage is 12/12 = 1

    The company issues 6,000 share on July so they were outstanding for 6 months so the weightage for these shares were 6/12 = 0.5.

    In order to find the average number of share we will multiply the weightages by the no of shares and add them so

    1*10,000 +

    0.5*6,000

    =13,000

    So Net income was 260,000 and average no of shares were 13,000

    EPS=260,000/13,000 = 20

    The EPS was $20 per share
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