Question

Earnings per Share The 2018 balance sheet for Guthrie Corporation revealed the following information: Common stock,...

Earnings per Share

The 2018 balance sheet for Guthrie Corporation revealed the following information:

  • Common stock, $10 par, 50,000 shares issued and outstanding
  • Preferred stock, $100 par, 6%, cumulative stock, 1,000 shares issued and outstanding

During 2019, Guthrie reported net income of $225,000 and engaged in the following stock transactions:

Mar. 1 Issued 10,000 shares of common stock for cash.
Apr. 1 Reacquired 2,000 shares of common stock as treasury stock.
Aug. 1 Resold 1,000 shares of treasury stock for cash.
Sept. 1 Declared and issued a 50% stock dividend on common stock.

Required:
3. Compute the basic EPS that would be disclosed by Guthrie. Round your answer to 2 decimal places.
Basic EPS

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Answer #1

Answer:

Calculation of Basic EPS

Basic EPS = Net income attributable to equity shareholders/ Weighted average no of shares

Calculation of net income attributable to equity shareholders = Net income - preference dividend

= $225000-$6000 = $219000

Calculation of weighted average no of shares

= (50000*2/12)+(60000*1/12)+(58000*4/12)+(59000*5/12)

= 57250

Basic EPS that would be disclosed by Guthrie = $219000/57250 = $3.82

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