Question

Basic Earnings per Share

Monona Company reported net income of $29,975 for 2019. During all of 2019, Monona had 1,000 shares of 10%, $100 par, nonconvertible preferred stock outstanding, on which the year's dividends had been paid. At the beginning of 2019, the company had 7,000 shares of common stock outstanding. On April 2, 2019, the company issued another 2,000 shares of common stock so that 9,000 common shares were outstanding at the end of 2019. Common dividends of $17,000 had been paid during 2019. At the end of 2019, the market price per share of common stock was $17.50.

Required:

1. Compute Monona's basic earnings per share for 2019. If required, round your answer to two decimal places.
$ per share

Answer 1

Net income	29975
Less: Preferred Dividends	10000	=1000*100*10%
Net income for Common Stockholders	19975
Divide by Common Shares outstanding	8500	=7000+(2000*9/12)
Basic earnings per share for 2019	2.35	per share