Question

For the year ended December 31, 2021, Norstar Industries reported net income of $955,000. At January 1, 2021, the company had 1,030,000 common shares outstanding. The following changes in the number of shares occurred during 2021

Apr. 30 Sold 75,000 shares in a public offering.
May 24 Declared and distributed a 5% stock dividend.
June 1 Issued 84,000 shares as part of the consideration for the purchase of assets from a subsidiary.
Compute Norstar's earnings per share for the year ended December 31, 2021.

Answer 1

To compute Norstar Industries' earnings per share for the year ended December 31, 2021, we need to consider the changes in the number of shares during the year.

Step-by-step explanation:

To compute Norstar Industries' earnings per share for the year ended December 31, 2021, we need to consider the changes in the number of shares during the year. Here's the step-by-step calculation:

1. Calculate the weighted average number of shares outstanding:
(1,030,000 shares at Jan 1, 2021) + (0.05 * 1,030,000 shares from the stock dividend) + (84,000 shares issued for asset purchase) - (75,000 shares sold in the public offering) = weighted average number of shares

2. Calculate earnings per share:
Net income / weighted average number of shares = earnings per share

Plugging in the numbers:
$955,000 / weighted average number of shares = earnings per share