Earnings per Share Required: Rodgers Corporation reported basic earnings per sha

Question

Earnings per Share

Required:

Rodgers Corporation reported basic earnings per share of $1.25 for the year ended December 31, 2013. Rodgers had 8,000 shares of cumulative, nonconvertible $100 par, 12% preferred stock outstanding during all of 2013. The company began 2013 with 200,000 shares of common stock outstanding and ended the year with 400,000 share of common stock outstanding, due to issuing 200,000 shares on July 1, 2013. Required: Determine Rodgers' net income for 2013. I know Basic EPS= NI- Prefered Div/ WA Common Shares Outstanding. For Prefered Dividends, I did 9%*$50 par* 2250= 96000 For the denominator, I did (200,000* 6/12 months)+(200,000* 6/12 months)= 200,000 Then, NI - 96,000/ 200,000= 1.25 Theregore, NI= $346,000 Why is this wrong??

Explanation / Answer

WA Common Shares Outstanding = 200,000 x 12/12 (outstanding whole year) + 200,000 x 6/12 = 300000 shares.

Preference dividend = 100 x 12% x 8000 = $96000

EPS= NI- Prefered Div/ WA Common Shares Outstanding

1.25 = (Net Income - Pref.Dividend) / WA Common Shares Outstanding

(Net Income - Pref.Dividend) = WA Common Shares Outstanding x 1.25

Net Income - $96000 = 300000 x 1.25

Net Income - $96000 = $375000

Net Income = $375000 + $96000 = $471000

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