Question
I am not sure where I am going wrong but my answer is coming back as incorrect. Question Mechforce, Incorporated had net income of $127,900
I am not sure where I am going wrong but my answer is coming back as incorrect.
Question
Mechforce, Incorporated had net income of $127,900 for the year ended December 31, 2022. At the beginning of the year, 15,000 shares of common stock were outstanding. On April 1, an additional 23,000 shares were issued. On October 1, the company purchased 2,000 shares of its own common stock and held them as treasury stock until the end of the year. No other changes in common shares outstanding occurred during the year. During the year, Mechforce paid the annual dividend on the 8,000 shares of 4.95%, $100 par value preferred stock that were outstanding the entire year.
Required:
Calculate basic earnings per share of common stock for the year ended December 31, 2022.
My Work and Answer
Step 1
Calculate the weighted average number shares of common stock outstanding for the year
1/1 3/31 15,000 shares outstanding
15,000 * 3/12 = 3,750
4/1 23,000 shares issued
15,000 + 23,000 = 38,000 * 6/12 = 19,000
10/1 2,000 shares * 3/12 = 500
3,750 + 19,000 + 500 = 23,250
Step 2
Net Income 127,900
Less Dividends (8,000 * 4.95% * 100) 39,600
127,900 - 39,600 = 88,300
Step 3
Calculate basic EPS
Net income/weight average
88,300/23,250 = 3.80 (rounded 2 decimal places per instructions)
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