On December 31, 2015, Berclair Inc. had 560 million shares of common stock and 7

Question

On December 31, 2015, Berclair Inc. had 560 million shares of common stock and 7 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2016, Berclair purchased 24 million shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2016. Four million treasury shares were sold on October 1. Net income for the year ended December 31, 2016, was $1,050 million.

Required: Compute Berclair's earnings per share for the year ended December 31, 2016. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Explanation / Answer

Earning to available to common stockholders:

= $1,050-7×$100×9%

= $987 million

Earnings per share:

= earning to available to common stockholders/number of common stocks outstanding

= $987/(560-24+26.8+4)

= $1.74 per share

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