Question

Ring Me Up Inc. has net income of $143,100 for the year ended December 31, 2019. At the beginning of the year, 36,000 shares of common stock were outstanding. On May 1, an additional 18,000 shares were issued. On December 1, the company purchased 4,300 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, Ring Me Up paid the annual dividend on the 9,000 shares of 4.65%, $100 par value preferred stock that were outstanding the entire year.

Required:
Calculate basic earnings per share of common stock for the year ended December 31, 2019.

Answer 1

$2.13

Step-by-step explanation:

Computation what the basic earnings per share of common stock for the year ended December 31, 2019 be

Using this formula

Basic earnings per share = Net income - preferred dividends / Weighted average no of shares outstanding

Let plug in the formula

Basic earnings per share = $143,100 - (9,000*4.65%*100) / (36,000*12/12)+(18,000*8/12) - (4,300*1/12)

Basic earnings per share = $143,100 - 41,850 / 36,000+12,000 - 358

Basic earnings per share = 101,250 / 47,642

Basic earnings per share =$2.13

Therefore the basic earnings per share of common stock for the year ended December 31, 2019 be $2.13