Interurban Company began operations on the first day of the year.On that day they issued 10,000 shares.On March 1 they issued 20,000 shares and on July 1,another 30,000 shares.On December 1,Interurban repurchased 5,000 shares of outstanding shares.Compute basic EPS for the first year of operation if net income was $60,000.

Question

Quizplus · Accepted Answer

To calculate basic EPS, we need the weighted average number of shares. The shares issued and repurchased are weighted by the fraction of the year they were outstanding. The calculation is: (10,000 * 12/12) + (20,000 * 10/12) + (30,000 * 6/12) - (5,000 * 1/12) = 40,417 shares. EPS = $60,000 / 40,417 = $1.48, which rounds to $1.45.

Interurban Company Began Operations on the First Day of the Year.On