Question

For the year ended December 31, 2021, Norstar Industries reported net income of $975,000. At January 1, 2021, the company had 1,110,000 common shares outstanding. The following changes in the number of shares occurred during 2021: Apr. 30 Sold 95,000 shares in a public offering. May 24 Declared and distributed a 5% stock dividend. June 1 Issued 108,000 shares as part of the consideration for the purchase of assets from a subsidiary. Required: Compute Norstar's earnings per share for the year ended December 31, 2021. (Enter your answers in thousands. Round "EPS" answer to 2 decimal places. Do not round intermediate calculations.)

Answer 1

Answer:

EPS as at 31 Dec 2012 is $0.71

Explanation:

The common shares outstanding as at 31st December 2021 is equal to:

Opening outstanding share of the year 2021 + Issuance of share in Apr.30.2021 + Stock distributed as dividend at May.24.2021 + Issuance of stock in June.1.2021

in which:

Opening outstanding share of the year 2021 = 1,110,000

Issuance of share in Apr.30.2021 = 95,000

Stock distributed as dividend at May.24.2021 = Stock outstanding at May.24 x 5% = (1,110,000 + 95,000) x 5% = 60,250

Issuance of stock in June.1.2021 = 108,000

=> The common shares outstanding as at 31st December 2021 = 1,373,250

=> EPS = 975,000/1,373,250 = $0.71