Question

Bramble Corp. had 2500000 shares of common stock outstanding on January 1 and December 31, 2021. In connection with the acquisition of a subsidiary company in June 2020, Bramble is required to issue 96000 additional shares of its common stock on July 1, 2022, to the former owners of the subsidiary. Bramble paid $195000 in preferred stock dividends in 2021, and reported net income of $3470000 for the year. Bramble's diluted earnings per share for 2021 should be (rounded to the nearest penny)

Answer 1

$1.47

Step-by-step explanation:

Diluted earnings per share = Earnings before preferred stock dividends ÷ Weighted Average Number of Common Stock Outstanding

where,

Earnings before preferred stock dividends is calculated as :

Net Income $3,470,000

Add Preferred Stock Dividends $195,000

Earnings attributable to Common Stock holders $3,665,000

Weighted Average Number of Common Stock Outstanding is calculated as :

Outstanding end of the year 2,500,000 shares

therefore,

Diluted earnings per share = $3,665,000 / 2,500,000 shares = $1.47