On December 31, 2012, the Bennett Company had 120,000 shares of common stock iss

Question

On December 31, 2012, the Bennett Company had 120,000 shares of common stock issued and outstanding. On July 1, 2013, the company sold 20,000 additional shares for cash. Bennett's net income for the year ended December 31, 2013, was $640,000. During 2013, Bennett declared and paid $88,000 in cash dividends on its nonconvertible preferred stock. What is the 2013 basic earnings per share? (Round your answer to 2 decimal places.)

On December 31, 2012, the Bennett Company had 120,000 shares of common stock issued and outstanding. On July 1, 2013, the company sold 20,000 additional shares for cash. Bennett's net income for the year ended December 31, 2013, was $640,000. During 2013, Bennett declared and paid $88,000 in cash dividends on its nonconvertible preferred stock. What is the 2013 basic earnings per share? (Round your answer to 2 decimal places.)

Explanation / Answer

Weighted Average Common Stock Outstanding = 120000*6/12 + (120000+20000)*6/12

Weighted Average Common Stock Outstanding = 130000

Basic earnings per share = (Net Income -Prefered Stock Dividend)/Weighted Average Common Stock Outstanding

Basic earnings per share = (640000-88000)/130000

Basic earnings per share = $ 4.25

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