Knowledge Check 01 On February 13, a jewelry store sells an engagement ring with a sales price of $10,000 to a nervous young man
1 answer:
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Answer:
Earnings Per Share (EPS) = $1.18
Explanation:
We know,
Earnings Per Share (EPS) =
Here,
Net Income = $2,500,000
Preferred Dividend = Total preferred stock in dollar x cost of preferred stock
Preferred Dividend = $5,000,000 x 8% = $400,000
No. of shares outstanding table is shown below (Weighted):
Shares outstanding + Additional shares - Treasury stock =
[750,000 x stock split] + [300,000 x (8/12) x stock split] - [150,000 x (5/12) x stock split]
= (750,000 x 2) + (200,000 x 2) - (62,500 x 2)
= 1,500,000 + 400,000 - 125,000
= 1,775,000
Now, EPS =
EPS = 1.18 (rounded to 2 decimal places)
<em>Note:</em> 1. As, there is a stock split of 2-for-1, that's why we multiply the stock by 2.
2. Since additional shares are issued on 1st May, therefore, the weight from May to December is for 8 months. Repurchased or Treasury stock should be removed from number of shares.