I received an answer for the following question:

In the Byte of Accounting project, I want the calculation of Earnings Per Share Ratio:

- The Net Income is $26,895.28 - The dividends (not specified as preferred but should it be included?) - $2,050.00

- Average Shares of Common Stock Outstanding (I am not sure how to calculate that one)

Here is the following information about shares from the transactions tab:

1- The Byte of Accounting Corporation (Byte) sells turn-key computer systems to midsize businesses on account. Byte was started by Lauryn on January 1 of last year when she was issued 1,800 shares of stock.

2- December 1: a new investor, made an investment in Byte by purchasing 2,300 shares of its common stock paying $43,700.00 in cash. The par value of the common stock was $18.00 per share.

The answer that I received was:

$13.12 earnings per share

Explanation: The formula to get EPS is Net Income Less Preferred Dividends divided by average number of outstanding shares. With the data on hand, there are no preferred shares so no preferred dividends on the $2,050,000 dividends.

The average number of shares outstanding is computed as beginning number of shares PLUS ending number of shares divided by 2. In this problem, (1,800 shares + 4,100 shares)/2 resulting to 2,100 average number of shares.

So net income of $26,895.28/2,100 shares will result to $13.12 earnings per share.

I have the following two questions regarding the above answer:

1) How did you calculate the 4,100 shares? 2) I calculated the (1,800 shares + 4,100 shares)/2 which equals to 2,950 shares. Where does the 2,100 shares come from?