A company had 30,000 shares of common stock outstanding on January 1, 2006. On March 1, the company issued an additional 18,000 shares of common stock. Net income for the year was $99,000. The earnings per share were (round to the nearest cent):

Question

Quizplus · Accepted Answer

To calculate earnings per share, we need to divide the net income by the weighted average number of shares outstanding.

Weighted average number of shares outstanding = (number of shares for part of the year x part of the year) + (number of shares for entire year x entire year)

= (30,000 x 2/12) + (48,000 x 10/12)

= 5,000 + 40,000

= 45,000

Earnings per share = Net income / Weighted average number of shares outstanding

= $99,000 / 45,000

= $2.06 (rounded to the nearest cent)

Therefore, the answer is C.

A Company Had 30,000 Shares of Common Stock Outstanding on January