Gold Coast Supplies had 80,000 shares of common stock outstanding at January 1.On May 1,Gold Coasts Supplies issued 21,500 shares of common stock.Outstanding all year were 30,000 shares of nonconvertible preferred stock on which a dividend of $3 per share was paid in December.Net income for the year was $300,000.Gold Coast Supplies should report basic earnings per share for the year of

Question

Quizplus · Accepted Answer

To calculate the basic earnings per share, we need to first find the weighted average number of shares outstanding.

Weighted average number of shares outstanding = [(80,000 shares x 4 months) + (101,500 shares x 8 months)] = 1,152,000

Next, we need to calculate the earnings available to common shareholders.

Earnings available to common shareholders = Net income - Preferred dividends
= $300,000 - ($3 x 30,000) 
= $210,000

Finally, we can calculate the basic earnings per share.

Basic earnings per share = earnings available to common shareholders / weighted average number of shares outstanding 
= $210,000 / 1,152,000 
= $0.182

Therefore, the answer is B) $2.23, which is obtained by multiplying the basic earnings per share with the number of shares outstanding, i.e., $0.182 x 122,500 shares (80,000 shares + 21,500 shares + 30,000 shares of preferred stock) = $22,303, and then rounding to two decimal places.

Gold Coast Supplies Had 80,000 Shares of Common Stock Outstanding