On December 31, 2015, the Bennett Company had 115,000 shares of common stock iss

Question

On December 31, 2015, the Bennett Company had 115,000 shares of common stock issued and outstanding. On July 1, 2016, the company sold 23,000 additional shares for cash. Bennett's net income for the year ended December 31, 2016, was $630,000. During 2016, Bennett declared and paid $86,000 in cash dividends on its nonconvertible preferred stock. What is the 2016 basic earnings per share? (Round your answer to 2 decimal places.)

$4.98.

$4.73.

$4.30.

None of these answer choices is correct.

On December 31, 2015, the Bennett Company had 115,000 shares of common stock issued and outstanding. On July 1, 2016, the company sold 23,000 additional shares for cash. Bennett's net income for the year ended December 31, 2016, was $630,000. During 2016, Bennett declared and paid $86,000 in cash dividends on its nonconvertible preferred stock. What is the 2016 basic earnings per share? (Round your answer to 2 decimal places.)

Explanation / Answer

Earnings available for equity share holders=Net income- Pref dividend

                                                                              =$630,000-$86,000

                                                                               =$544,000

Equivalent shares outstanding =115,000 + (23,000 x 6/12)

                                                               =115,000+ 11,500

                                                                =126,500 shares

Basic eps=$544,000/126,500=4.30

Option 3 is correct

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