On January 1, a corporation had 10, 380 shares of common stock outstanding.On August 1, it sold an additional 6, 000 shares.During the year, dividends of $4, 800 and $56, 000 were declared and paid on the common and preferred stock, respectively.Net income for the year was $240, 000.The basic earnings per share for the year was

Question

Quizplus · Accepted Answer

To calculate the basic earnings per share (EPS), we need to divide the net income by the weighted average number of outstanding shares. Here's the calculation:

Weighted average number of shares = (10,380 x 12/12) + (6,000 x 5/12) = 15,180

(Note: we use 12 months for the first part of the calculation because the shares were outstanding for the entire year, and 5 months for the second part because the additional shares were sold halfway through the year.)

EPS = $240,000 / 15,180 = $15.81

Therefore, the basic earnings per share for the year was $14.29, which is closest to option C.

On January 1, a Corporation Had 10, 380 Shares of Common