On January 1, 2016, Kiper Corporation had 12,000 shares of common stock outstanding. Kiper reacquired 1,000 shares on May 1, and issued another 5,000 shares on September 1. The company also has 10,000 shares of $20 par, 10%, noncumulative preferred stock outstanding on which no dividends have been declared during the last two years. The company had a $28,360 loss for the year. What is the basic earnings per share for the year?

Question

Quizplus · Accepted Answer

Basic earnings per share (EPS) is calculated as (Net Income - Preferred Dividends) / Weighted Average Shares Outstanding. Since no dividends were declared on the preferred stock, the preferred dividends are $0. The net income is a loss of $28,360, so we treat it as a negative income. For the weighted average shares, we calculate as follows: (12,000 shares for 4 months) + (11,000 shares for 4 months, after reacquiring 1,000 shares) + (16,000 shares for 4 months, after issuing another 5,000 shares) = 48,000 + 44,000 + 64,000 = 156,000 / 12 = 13,000 average shares. The EPS is then (-$28,360 / 13,000 shares) = -$2.18.

On January 1, 2016, Kiper Corporation Had 12,000 Shares of Common