Homework Answers
Answer :-
Basic Earning per share = $2.7488
.
Explanation :-
Basic Earning per share = Income available to Common shareholders / Weighted avarage number of common shareholders outstanding
Income available to Common shareholders = Net Income - Preferred Dividend
Net Income = $7,67,000
Preferred Dividend = Face value of dividend × Dividend rate
= (35,000 × $20 ) × 6%
= $7,00,000 × 6%
= $42,000
Income available to Common shareholders = Net Income - Preferred Dividend
= $7,67,000 - $42,000
Income available to Common shareholders = $7,25,000
Weighted avarage number of common shareholders outstanding = commen shares outstanding at beginning of the year + weighted avarage of additional shares introduced
| Number of commen shares outstanding on 1 feb, 2019 | 253,000 | |
| Add ; - 43,000 shares Issued on 31,Oct,2019 | 43,000 × (3/12) | 10,750 |
| Number of commen shares outstanding on 31 Jan , 2019 | 2,63,750 |
NB ;- Calculation of weighted avarage of additional shares issued = Number of shares issued × (Months remaining in year / Total months in a year)
.
Basic Earning per share = Income available to Common shareholders / Weighted avarage number of common shareholders outstanding
= $7,25,000 / 2,63,750
Basic Earning per share = $2.7488
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