Question

Question 2 0/1 View Policies Show Attempt History Current Attempt in Progress X Your answer is incorrect. 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 $ 2.42

Answer 1

Explanation:

Event	Dates outstanding	Shares outstanding	Fraction of year	weighted shares
Beginning balance	Jan1-April1	942,000	3/12	235,500
Issued shares	April1- October1	1,391,000	6/12	695,500
Reacquired share	October 1-Dec1	1,282,000	3/12	320,500

Weighted average no of shares outstanding unadjusted =1,251,500

Stock dividends on 15/02/2021 = 1.05

Weighted average no of shares outstanding adjusted = 1,314,075

Net income= $2,521,000

(-)Preferred dividend = $990,500(283,000×50×7%)

Net income applicable to common stock =$1,530,500

Earnings per share =( Net income applicable to common stock)/ (Weighted average no of shares outstanding)

EPS = $1,530,500/1,314,075

EPS=1.16

_____×____

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