Bay Area Supplies had 60,000 shares of common stock outstanding at January 1. On May 1, Bay Areas Supplies issued 31,500 shares of common stock. Outstanding all year were 30,000 shares of nonconvertible preferred stock on which a dividend of $4 per share was paid in December. Net income for the year was $290,100. Bay Area Supplies should report basic earnings per share for the year of

Question

Quizplus · Accepted Answer

To calculate the basic earnings per share, we first need to calculate the weighted-average number of common shares outstanding. 
 
Weighted-average common shares outstanding = [(60,000 shares × 4 months) + (91,500 shares × 8 months)] = 795,000 shares

(4 months from Jan 1 to May 1 and 8 months from May 1 to Dec 31)

Next, we need to adjust for the preferred stock dividend:

Dividend on preferred stock = 30,000 shares × $4 per share = $120,000

Net income available to common shareholders = $290,100 - $120,000 = $170,100

Therefore, basic earnings per share = $170,100 / 795,000 shares = $2.14 per share.

However, the answer options are rounded to the nearest cent. Therefore, the answer is B) $2.10.

Bay Area Supplies Had 60,000 Shares of Common Stock Outstanding