During the year, Ringmeup, Inc., paid the annual dividend on the 7,000 shares of 4.75%, $100 par value preferred stock that were outstanding the entire year. Calculate basic earnings per share of common stock for the year ended December 31, 2013 ## Basic Earning Per Share Earning per share is one of the financial ratio and is also shown along with balance sheets. This ratio shows how much the company is earning against each share or we can say that how much each share gets of the total earnings. The earning per share is computed by dividing the average number of common stock from net earnings available to common stock. ## Answer and Explanation: Basic earning per share = Net earnings available to common stock/ weight average of shares outstanding Here, • Earnings available for common stock = Net Income - Dividend paid to preferred stock =>$126300 - (7000 shares * $100 * 4.75%) =$93050
• Weighted Average of shares outstanding = 44000 shares * (12/12) + 13000 shares * (8/12) - 4500 shares * (1/12) = 52291.67 shares

So,

Basic Earnings Per Share of Common Stock = $93050 / 52291.67 shares =$1.779 per share.

How to Calculate Earnings Per Share: Definition & Formula

from Introduction to Business: Homework Help Resource

Chapter 24 / Lesson 14
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