Question

Burns Company reported $1,161.405 million in net income in 2021. On January 1, 2021, the company had 409 million shares of common stock outstanding. On March 1, 2021, 29.4 million new shares of common stock were sold for cash. On June 1, 2021, the company's common stock split 2 for 1. On July 1, 2021, 13.4 million shares were reacquired as treasury stock.Required: Compute Burns' basic earnings per share for the year ended December 31, 2021

Answer 1

Earnings Per Share = $1.35

Step-by-step explanation:

To calculate the basic earnings per share, we first need to compute the Weighted Average No. of Shares Outstanding:

Jan.1: 409 * (12/12) = 409 * 2 = 818 million

Mar.1: 29.4 * (10/12) = 24.5 * 2 = 49 million

July 1: 13.4 * (6/12) = (6.7) million

Weighted Average No. of Shares Outstanding: = 860.3 million

Note: We multiplied by 2 in Jan.1 and Mar.1 transactions to account for common stock split 2 for 1.

Now calculate the Earnings Per Share:

Earnings Per Share = Net Income

Weighted Average No. of Shares Outstanding

Earnings Per Share = 1,161.405

860.3

Earnings Per Share = $1.35