On December 31, 2015, Berclair Inc. had 340 million shares of common stock and 3

Question

On December 31, 2015, Berclair Inc. had 340 million shares of common stock and 3 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2016, Berclair purchased 18 million shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2016. Three million treasury shares were sold on October 1. Net income for the year ended December 31, 2016, was $500 million. Required: Compute Berclair's earnings per share for the year ended December 31, 2016.

Explanation / Answer

Earning Per Share = Net Income available to equity shareholders / Weighted AVerage Common stock outstanding

Net Income available to equity shareholders = Net income - Preferred Dividends = 500 million - (9% of 3*100)

Net Income available to equity shareholders = 500 million - 27 million = 473 million

Weighted AVerage Common stock outstanding
340 million shares for 2 months = 340 * 2/12

(340 - 18) million shares for 7 months = 322 * 7/12

(340 - 18 - 3) million shares for 3 months = 319 * 3/12

Weighted AVerage Common stock outstanding = 324.25 million

EPS = 473 / 324.25 = 1.46

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