e-Bay Inc. provides the following information for the year 2015: $$\begin{array} { | l | r | }
\hline \text { Net income } & \$ 250,000 \
\hline \text { Market price per share of common stock } & \$ 50 \text { per share } \
\hline \text { Dividends paid } & \$ 180,000 \
\hline \text { Common stock outstanding at Jan. } 1,2015 & 150,000 \text { shares } \
\hline \text { Common stock outstanding at Dec. } 31,2015 & 200,000 \text { shares } \
\hline
\end{array}$$ The company has no preferred stock outstanding. Calculate the earnings per share for the year 2015.

Question

e-Bay Inc. provides the following information for the year 2015: $$\begin{array} { | l | r | } 
\hline \text { Net income } & \$ 250,000 \
\hline \text { Market price per share of common stock } & \$ 50 \text { per share } \
\hline \text { Dividends paid } & \$ 180,000 \
\hline \text { Common stock outstanding at Jan. } 1,2015 & 150,000 \text { shares } \
\hline \text { Common stock outstanding at Dec. } 31,2015 & 200,000 \text { shares } \
\hline
\end{array}$$ The company has no preferred stock outstanding. Calculate the earnings per share for the year 2015.

Quizplus · Accepted Answer

Earnings per share (EPS) is calculated by dividing the net income by the weighted average number of common shares outstanding during the period.
Weighted Average Number of Shares Outstanding = [(Number of shares at the beginning of the year) + (Number of shares at the end of the year)] / 2
Weighted Average Number of Shares Outstanding = [(150,000) + (200,000)] / 2 = 175,000
Earnings Per Share = (Net Income - Preferred Dividends) / Weighted Average Number of Shares Outstanding
As there are no preferred dividends, EPS = Net income / Weighted Average Number of Shares Outstanding
EPS = $250,000 / 175,000 = $1.43 per share (rounded to the nearest cent)
Therefore, the correct choice is C.

E-Bay Inc Provides the Following Information for the Year 2015