On January 1, a company has 700,000 shares of issued and outstanding common stock. On March 1, the company repurchases 60,000 shares. On June 1, it effects a 2-for-1 stock split. On November 1, it issues 240,000 shares. The company has a net income for the year of $2,720,000.

Required:

What is the basic earnings per share of common stock for the year (rounded to the nearest cent) ?

Question

Business

Ignacio Curtis

29 September, 08:39

On January 1, a company has 700,000 shares of issued and outstanding common stock. On March 1, the company repurchases 60,000 shares. On June 1, it effects a 2-for-1 stock split. On November 1, it issues 240,000 shares. The company has a net income for the year of $2,720,000.

Required:

What is the basic earnings per share of common stock for the year (rounded to the nearest cent) ?

+1

Answers (1)

Know the Answer?

Beatrice Miles · Answer 1

Basic EPS = 1.8

Explanation:

March 1 outstanding shares = 700,000 - 60,000 = 640,000

June 1 outstanding shares = 640,000 * 2 = 1,280,000

November 1 outstanding shares = 1,280,000 + 240,000 = 1,520,000

Net income = $2,720,000.

Basic earnings per shares (EPS) =

income available to ordinary shareholders/Number of shares outstanding

=$2,720,000/1,520,000 units = 1.789

Basic EPS = 1.8