Question

The Common Stock account for Baltimore Corporation on January 1, 2018 was $70,000. On July 1, 2018 Baltimore issued an additional 7,500 shares of common stock. The Common Stock is $5 par. There was neither Preferred Stock nor any Treasury Stock. Paid in Capital Excess to par Common Stock was $20,000 on January 1 and $40,000 on July 2 and net income was $111,000. Use this information to determine for December 31, 2018 the amount of Earnings per Share (rounded to the nearest cent).

Answer 1

$6.25 per share

Step-by-step explanation:

Basic Earning per share is calculated dividing Earning for the year excluding preferred dividend by weighted average number of shares.

Weighted average number of shares are used to calculate the basic earning per share.

January 1,

Numbers of share = $70,000 / $5 = 14,000 share

July 1,

Numbers of share = 14,000 share + 7,500 shares = 21,500 shares

Weighted Average Number of Shares = ( 14,000 x 6/12 ) + ( 21,500 x 6/12 )

Weighted Average Number of Shares = 7,000 shares + 10,750 shares

Weighted Average Number of Shares = 17,750 shares

Earning per share = Net Income / Weighted average numbers of shares

EPS = $111,000 / 17,750 shares = $6.25 per share