National Corporation was organized on January 1 and issued 600,000 shares of common stock on that date.On July 1,an additional 200,000 shares were issued for cash.Net income for the year was $3,675,000.Net earnings per share amounted to:

Question

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The weighted average number of shares is calculated by taking the 600,000 shares outstanding for the entire year and the 200,000 shares outstanding for half the year (since they were issued on July 1). This gives (600,000 * 12/12) + (200,000 * 6/12) = 600,000 + 100,000 = 700,000 shares on a weighted average basis. Net earnings per share (EPS) is calculated by dividing the net income by the weighted average number of shares, so $3,675,000 / 700,000 = $5.25 per share.

National Corporation Was Organized on January 1 and Issued 600,000