Question

On January 1, 2021, Algerian Delivery had 100,000 shares of common stock outstanding. The following transactions occurred during 2021: March 1: Reacquired 3,100 shares, accounted for as treasury stock. September 30: Sold all the treasury shares. December 1: Sold 12,100 new shares for cash. December 31: Reported a net income of $298,750. Required: Calculate Algerian Delivery's basic earnings per share for the year ended December 31, 2021. (Round your answer to 2 decimal places.)

Answer 1

Algerian Delivery's basic earnings per share for the year ended December 31, 2021 is $3.01

Step-by-step explanation:

In order to calculate Algerian Delivery's basic earnings per share for the year ended December 31, 2021 we would have to make first the following calculations:

Net Income = $298,750

Calculation of Weighted Average of Number of Equity Shares:

Outstanding on Jan 1 = 100,000*12/12 = 100,000

Less: Treasury Stock 3,100*10/12 = (2,583)

Sold Treasury Shares 3,100*3/12 = 775

New Shares Sold 12100*1/12 = 1,008

Therefore, Weighted Average of Equity Shares during the year = 100,000 - 2,583 + 775 + 1,008 =99,200

Therefore, Basic Earnings per Share = Net Income/Weighted Average of Equity Shares outstanding during the year

= $298,750/99,200 = $3.01

Algerian Delivery's basic earnings per share for the year ended December 31, 2021 is $3.01