Question

On December 31, 2020, Berclair Inc. had 400 million shares of common stock and 6 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2021, Berclair purchased 30 million shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2021. Five million treasury shares were sold on October 1. Net income for the year ended December 31, 2021, was $650 million.

Answer 1

Answer: $1.51 per share

Explanation:

Here's the question:

Compute Berclair's earnings per share for the year ended December 31, 2021.

Firstly, we.calculate the weighted average number of shares outstanding which will be:

= ( 400 × 12/12 × 1.05 ) - ( 30 × 10/12 × 1.05 ) + ( 5 × 3/12 )

= 420 - 26.25 + 1.25

= 395 million

Then, we calculate the preferred dividend which will be:

= 6 × 100 × 9%

= 6 × 100 × 0.09

= 54 million

Earnings per share will be:

= ( Net income - Preferrred dividend ) / Weighted average number of shares outstanding

= ( 650 - 54 ) / 395

= 596 / 395

= $1.51 per share

Berclair's earnings per share is $1.51 per share