Question

Ringmeup Inc. had net income of $129,300 for the year ended December 31, 2019. At the beginning of the year, 37,000 shares of common stock were outstanding. On May 1, an additional 15,000 shares were issued. On December 1, the company purchased 4,100 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, Ringmeup paid the annual dividend on the 6,000 shares of 4.95%, $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. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

$2.13 per share

Step-by-step explanation:

The computation of the basic earnings per share is shown below:

But before that following calculations need to be done

The Weighted average share is

= (37000 shares × 4 ÷ 12 + (37,000 + 15,000) shares × 7 ÷ 12 + (52,000 - 4,100) shares × 1 ÷ 12)

= 46,658 Shares

And, the Preferred dividend is

= 6,000 shares × $100 × 4.95%

= $29,700

Now EPS is

= (Net income - Preferred dividend) ÷ Weighted average share outstanding = ($129,300 - $29,700) ÷ 46,658

= $2.13 per share