Question

Question 2 --/1 View Policies Current Attempt in Progress At January 1, 2020, Martinez Company's outstanding shares included the following. 283,000 shares of $50 par value, 7% cumulative preferred stock 942,000 shares of $1 par value common stock Net income for 2020 was $2,521,000. No cash dividends were declared or paid during 2020. On February 15, 2021, however, all preferred dividends in arrears were paid, together with a 5% stock dividend on common shares. There were no dividends in arrears prior to 2020. On April 1, 2020, 449,000 shares of common stock were sold for $10 per share, and on October 1, 2020, 109,000 shares of common stock were purchased for $19 per share and held as treasury stock. Compute earnings per share for 2020. Assume that financial statements for 2020 were issued in March 2021. (Round answer to 2 decimal places, e.g. $2.55.) Earnings per share $

Answer 1

Jan-1-2020 April-1-2020 Oct-1-2020 Outstanding shares No. of shares Weight Common shares 942,000 12/12 Common shares -449,000 9/12 Common shares 109,000 3/12 Total weighted average outstanding common stock (AxB) Weighted Avg. outstanding shares 942,000 -336,750 27,250 632,500 Net income Less: Preferred dividend (283,000 x $50 x 7%) Net earnings for equity $2,521,000 990,500 1,530,500 Earning per share = (Net income - Preferred dividend)/Weighted average outstanding common stock =$15,30,500/632,500 =2.42