Question

Strauch Co. has one class of common stock outstanding and no other securities that are potentially convertible into common stock. During 2024, 100,000 shares of common stock were outstanding. In 2025, two distributions of additional common shares occurred: On April 1, 20,000 shares of treasury stock were sold, and on July 1, a 2-for-1 stock split was issued. Net income was $410,000 in 2025 and $350,000 in 2024. What amounts should Strauch report as earnings per share in its 2025 and 2024 comparative income statements issued early in 2026?
Year 2025 Year 2024
A. $2.34 $3.50
B. $1.78 $3.50
C. $1.78 $1.75
D. $2.34 $1.75

Answer 1

Answer:

C. $1.78 $1.75

Explanation:

Calculation for What amounts should Strauch report as earnings per share in its 2025 and 2024 comparative income statements issued early in 2026

Calculation for What amounts should Strauch report as earnings per share in its 2025

First step is to calculate the Weighted average shares for year 2025

Weighted average shares 2025 = [100,000 + 20,000(9/12)]÷2

Weighted average shares 2025=(100,000+15,000)*2

Weighted average shares 2025=115,000*2

Weighted average shares 2025= 230,000

Now let calculate the Earnings per share for year 2025

2025 Earnings per share for year= $410,000/230,000

2025 Earnings per share for year= $1.78

Therefore the 2025 Earnings per share for year will be $1.78

Calculation for What amounts should Strauch report as earnings per share in its 2024

First step is to calculate the Weighted average shares for year 2024

Weighted average shares 2024= 100,000(2)

Weighted average shares 2024= 200,000

Now let calculate the Earnings per share for year 2024

2024 Earnings per share = $350,000/200,000 2024 Earnings per share= $1.75

Therefore the Earnings per share for year 2024 will be $1.75