Argonaut Enterprises had 500,000 shares of common stock outstanding on January 1.On June 1,Argonaut issued an additional 60,000 common shares.Argonaut has no treasury stock.If Argonaut's net income was $133,750 for the year,its earnings per share for the year was ________,rounded to the nearest cent.

Question

Quizplus · Accepted Answer

First, we need to calculate the weighted average of the shares outstanding for the year. We can do this by taking the number of shares outstanding for each period, multiplying it by the number of months it was outstanding, and summing these values.

For the first 5 months (January 1 to May 31), there were 500,000 shares outstanding.

For the last 7 months (June 1 to December 31), there were 560,000 shares outstanding (500,000 + 60,000).

Weighted average shares outstanding = (500,000 x 5) + (560,000 x 7) = 5,500,000

Now we can calculate earnings per share:

Earnings per share = Net income / Weighted average shares outstanding 
Earnings per share = $133,750 / 5,500,000 = $0.0243

Rounded to the nearest cent, the answer is $0.25 (choice D).

Argonaut Enterprises Had 500,000 Shares of Common Stock Outstanding on January