Question

Paul Corporation reported net income of $260,000 during the current calendar year. The company had 10,000 common shares outstanding on January 1 and sold an additional 6,000 shares on July 1. What is the company’s basic EPS?

Answer 1

Answer:

the company’s basic EPS is $37.14

Explanation:

Basic Earnings per share = Earnings attributable to holders of common stock ÷ Weighted Average Number of Common Stocks

Step 1 : Calculation of Earnings attributable to holders of common stock

This is given. It is the Net Income during the current year of $260,000

Step 2 : Calculation of Weighted Average Number of Common Stocks

Outstanding Stocks at the beginning of the year                 10,000

Less Sold Stocks - On Weight Basis (6/12 × 6,000)               3,000

Weighted Average Number of Common Stocks                    7,000

Therefore,

Basic Earnings per share = $260,000 ÷ 7,000

                                           = $37.14