Question

I cannot seem to get the earnings per share of common stock correct..

Earnings per Share and Multiple-Step Income Statement The following summarized data relate to Bowden Corporation's current operations: Sales revenue Cost of goods sold Selling expenses Administrative expenses Loss on sale of equipment Income tax expense Shares of common stock Outstanding at January 1 Additional issued at May 1 Additional issued at November 1 $760,000 450,000 65,000 72,000 5,000 42,000 20,000 shares 7,000 shares 2,000 shares Required Prepare a multiple-step income statement for Bowden Corporation for the year. Include earnings per share disclosure at the bottom of the income statement. Do not use negative signs with any of your answers below. BOWDEN CORPORATION Income Statement For the Year Ended December 31 Sales Revenue $ 760,000 Cost of Goods Sold 450,000 Gross Profit on Sales 310,000 Selling Expenses $ 65,000 Administrative Expenses 72,000 137,000 Operating Income 173,000 Loss on Sale of Equipment 5,000 Income before Taxes 168,000 Income Tax Expense 42,000 Net Income $ 126,000 Earnings per share of Common Stock $ 4.34 X

Answer 1

EPS = Net Income/ Weighted Average No of Shares Outstanding*
	=$126000/25000 = $5.4

*Weighted Average Number of Shares Outstanding
Date	Cummulative Shares Outstanding	No of months of the year shares remain Outstanding	Weights based on no. of months to year	Weighted Average
1-Jan	20000	4 (Jan-Apr)	4/12 = 0.3333	20000*0.333 = 6667
1-May	(20000+7000) =27000	6 (May-Oct)	6/12 = 0.5	27000*0.5 = 13500
1-Nov	(27000+2000)= 29000	2 (Nov-Dec)	2/12 = 0.16667	29000*0.1667= 4833
				25000

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