Coronado Inc. presented the following data. Net income $2,370,000 Preferred stock: 53,000 shares...

Question:

Coronado Inc. presented the following data.

Net income $2,370,000

Preferred stock: 53,000 shares outstanding, $100 par, 8% cumulative, not convertible 5,300,000

Common stock: Shares outstanding 1/1 769,200 Issued for cash, 5/1 274,800

Acquired treasury stock for cash, 8/1 144,000 2-for-1 stock split, 10/1

Compute earnings per share. (Round answer to 2 decimal places)

Earnings per Share:

Earnings-per-share(EPS) is the measure of profitability per outstanding share of common stock. EPS is required to be presented in the financial statements in two forms below the income statement: basic EPS and diluted EPS.

Answer and Explanation:


Earnings per share:


Earnings per share = net income available to common shareholders / weighted average outstanding common shares

Net income available to common stockholders = net income - preferred dividend

= $2,370,000 - ($5,300,000 * 8%) = $2,370,000 - $424,000 = $1,946,000

Weighted average outstanding common shares:


Common stock issued on Jan 1 = 769,200 shares (outstanding for 12 months)

Common stock issued on May 1 = 274,800 shares (outstanding for 8 months)

Acquired treasury stock on Aug 1 = 144,000 (not outstanding for 5 months)

Stock split 2 for 1 on Oct 1

So, weighted average outstanding common shares = ((769,200 * 12/12) + (274,800 * 8/12) - (144,000 * 5/12)) * 2

= (769,200 + 183,200 - 60,000) * 2 = 892,400 * 2 = 1,784,800 shares

So, Earnings per share = $19,46,000 / 1,784,800 = $1.09 per share


Learn more about this topic:

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How to Calculate Earnings Per Share: Definition & Formula

from Introduction to Business: Homework Help Resource

Chapter 24 / Lesson 14
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