For the year ended December 31, 2018, Norstar Industries reported net income of $980,000. At January 1, 2018, the company had 1,130,000 common shares outstanding. The following changes in the number of shares occurred during 2018:
Apr. 30 Sold 100,000 shares in a public offering.
May 24 Declared and distributed a 5% stock dividend.
June 1 Issued 114,000 shares as part of the consideration for the purchase of assets from a subsidiary.
Required: Compute Norstar's earnings per share for the year ended December 31, 2018. (Enter your answers in thousands.)
Stock dividends, Stock splits or Stock subscriptions (retroactively adjusted) - Shares are treated as if they had always been outstanding and included at full amount for current year.
January 1, 2018 | Shares outstanding | 1,130,000 |
April 30 | Shres sold | 66,667 (100,000*8/12) |
May 24 | Stock dividend | 59,833 [(1,130,000+66,667)*5%] |
June 1 | Shares issued | 66,500 (114,000*7/12) |
1,323,000 |
Earnings per share = Net Income / Weighted average number of common stock outstanding
= $980,000 / 1,323,000
= $0.74
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