Question

At December 31, Meyer Company had 500,000 shares of common stock issued and outstanding, 400,000 of which had been issued and outstanding throughout the year and 100,000 of which were issued on October 1. Net income for the year ended December 31 was $510,000. What should be Meyer's earnings per common share, rounded to the nearest penny?

Answer 1

$1.2

Step-by-step explanation:

The computation of earning per common share is shown below:

Earning per share = (Net income) ÷ (Number of shares)

where,

Net income = $510,000

And, the number of shares = $400,000 + $100,000 × (3 months ÷ 12 months)

= $400,000 + $25,000

= $425,000

The 3 months is calculated from October 1 to December 31

Now put these values to the above formula

So, the value would equal to

= $510,000 ÷ $425,000

= $1.2