Question

7.. Getaway Travel Company reported net income for 2021 in the amount of $50,000. During 2021, Getaway declared and paid $2,000 in cash dividends on its nonconvertible preferred stock. Getaway also paid $10,000 cash dividends on its common stock. Getaway had 40,000 common shares outstanding from January 1 until 10,000 new shares were sold for cash on July 1, 2021. A 2-for-1 stock split was granted on July 5, 2021. What is the 2021 basic earnings per share

Answer 1

Answer:Earnings per share fOR 2021= 0.53

Step-by-step explanation:

Earnings per share =Total earnings available to shareholders(Net income - preferred dividends )/Weighted Average Outstanding shares

Net income = $50,000

preferred dividend= $2,000

Total earnings available to common shareholders = $50,000 - $2000= $48,000

using a 2-1 stock spilt , outstanding shares= 40,000 x 2 + 10,000 x 6/12(jan- 1st july ) x 2 = 80,000 + 10,000 = $90,000

Earnings per share = $48,000/ $90,000 =0.53