Allcan Limited has 20,000 common shares issued and outstanding at January 1, 2014.On July 1 the company sold an additional 10,000 common shares for proceeds of $100,000.Net income for the year was $30,000.What would the earnings per share be?

Question

Quizplus · Accepted Answer

First, we need to calculate the weighted average of the number of shares outstanding:
(20,000 x 6/12 months) + (30,000 x 6/12 months) = 25,000
Then, we divide the net income by the weighted average number of shares outstanding:
$30,000 / 25,000 shares = $1.20 per share

Allcan Limited Has 20,000 Common Shares Issued and Outstanding at January