Question

The Common Stock account for Alpha Corporation on January 1, 2017 was $37,500. On June 1, 2017 Alpha issued an additional 4,500 shares of common stock. The Common Stock is $5 par. There was neither Preferred Stock nor any Treasury Stock. Paid in Capital Excess to par Common Stock was $10,000 on January 1 and $15,000 on June 2 and net income was $124,700. Use this information to determine for December 31, 2017 the amount of: a. Total Stockholders Equity b. Earnings per Share (rounded to the nearest penny)

Answer 1

Answer:

(a) $199,700

(b) $12.32

Explanation:

(a) Total paid in capital:

= common stock + Paid in capital in excess of par

= [$37,500 + (4,500 × $5)] + $15,000

= $60,000 + $15,000

= $75,000

Total stockholder's equity:

= Total paid in capital + Retained earnings

= $75,000 + $124,700

= $199,700

(b) Weighted average number of shares:

= First five months + Next seven months

= [(37,500 ÷ $5) × (5÷12)] + [((37,500 ÷ $5) + 4,500) × (7÷12)]

= 3,125 + 7,000

= 10,125

Earnings per Share = Net income ÷ Weighted average number of shares

                                = $124,700 ÷ 10,125

                                = $12.32