Question

On December 31, 2020, the Bennett Company had 120,000 shares of common stock issued and outstanding. On July 1, 2021, the company sold 18,000 additional shares for cash. Bennett's net income for the year ended December 31, 2021, was $640,000. During 2021, Bennett declared and paid $72,000 in cash dividends on its nonconvertible preferred stock. What is the 2021 basic earnings per share?

Answer 1

Answer:

$4.40 per share

Explanation:

The computation of the earning per share is shown below:

Earning per share = (Net income - preference dividend) ÷ (Weighted average of number of shares)

where,

Net income is $640,000

Preference dividend is $72,000

And, the weighted average number of share is

= 120,000 shares + (18,000 shares  ×  6 months ÷ 12 months )

= 120,000 shares + 9,000 shares

= 129,000 shares

So, the earning per share is

= ($640,00 - $72,000) ÷ (129,000 shares)

= $4.40 per share

We simply applied the above formula