Question

Company had 50,000 shares of common stock outstanding on January 1, 2021. On April 1, 2021, the company issued 20,000 shares of common stock. The company had outstanding fully vested incentive stock options for 5,000 shares exercisable at $10 that had not been exercised by its executives. The average market price of common stock was $12. The company reported net income in the amount of $269,915 for 2021. What is the basic earnings per share (rounded)?

Answer 1

$4.15

Step-by-step explanation:

Net income $269,915

Shares of common stock outstanding 50,000

Shares of common stock 20,000

Hence:

$269,915/(50,000 + (20,000 × 9/12)

=$269,915/50,000+15,000

=$269,915/65,000

= $4.15

Therefore the basic earnings per share (rounded) is $4.15