Question

Hardaway Fixtures' balance sheet at December 31, 2020, included the following: Shares issued and outstanding: Common stock, $1 par $ 1,040,000 Nonconvertible preferred stock, $50 par 15,000 On July 21, 2021, Hardaway issued a 25% stock dividend on its common stock. On December 12, it paid $65,000 cash dividends on the preferred stock. Net income for the year ended December 31, 2021, was $4,400,000. Required:Compute Hardaway's earnings per share for the year ended December 31, 2021.

Answer 1

Answer:

$3.33 per share

Explanation:

Given that,

Common stock, $1 par = $1,040,000

Stock dividend = 25% on its common stock

Net income = $4,400,000

Dividend paid to stockholder's = $65,000

Stock dividend:

= Shares at January 1 × 25%

= 1,040,000 × 25%

= 260,000 shares

Earnings per share:

= (Net income - Preferred dividend) ÷ (Shares at January 1 + Stock dividend)

= ($4,400,000 - $65,000) ÷ (1,040,000 shares + 260,000 shares)

= $4,335,000 ÷ 1,300,000

= $3.33 per share