Owl Co. had 60,000 shares of common stock outstanding at January 1, 2019. On Oct
ID: 2529782 • Letter: O
Question
Owl Co. had 60,000 shares of common stock outstanding at January 1, 2019. On October 1, it issued 30,000 additional shares of common stock. Outstanding all year were 10,000 shares of nonconvertible cumulative preferred stock. On December 31, 2019, Owl reported net income of $100,000 and declared $30,000 of dividends, paying the first $10,000 to preferred shareholders. What is Owl's 2019 earnings per share? $1.33 $1.09 $1.38 $1.20Owl Co. had a $350,000 net income. Beginning common shares outstanding were 85,000. Owl also had 20,000, 5% nonconvertible, cumulative, $100 par preferred shares outstanding the entire year. No cash dividends were declared but Owl did declare and distribute a 3 for 1 stock split on common shares on July 1. What is earnings per share? $1.47 $.98 $3.96 $1.37 Owl Co. had 60,000 shares of common stock outstanding at January 1, 2019. On October 1, it issued 30,000 additional shares of common stock. Outstanding all year were 10,000 shares of nonconvertible cumulative preferred stock. On December 31, 2019, Owl reported net income of $100,000 and declared $30,000 of dividends, paying the first $10,000 to preferred shareholders. What is Owl's 2019 earnings per share? $1.33 $1.09 $1.38 $1.20
Owl Co. had a $350,000 net income. Beginning common shares outstanding were 85,000. Owl also had 20,000, 5% nonconvertible, cumulative, $100 par preferred shares outstanding the entire year. No cash dividends were declared but Owl did declare and distribute a 3 for 1 stock split on common shares on July 1. What is earnings per share? $1.47 $.98 $3.96 $1.37 Owl Co. had 60,000 shares of common stock outstanding at January 1, 2019. On October 1, it issued 30,000 additional shares of common stock. Outstanding all year were 10,000 shares of nonconvertible cumulative preferred stock. On December 31, 2019, Owl reported net income of $100,000 and declared $30,000 of dividends, paying the first $10,000 to preferred shareholders. What is Owl's 2019 earnings per share? $1.33 $1.09 $1.38 $1.20
Owl Co. had a $350,000 net income. Beginning common shares outstanding were 85,000. Owl also had 20,000, 5% nonconvertible, cumulative, $100 par preferred shares outstanding the entire year. No cash dividends were declared but Owl did declare and distribute a 3 for 1 stock split on common shares on July 1. What is earnings per share? $1.47 $.98 $3.96 $1.37 Owl Co. had a $350,000 net income. Beginning common shares outstanding were 85,000. Owl also had 20,000, 5% nonconvertible, cumulative, $100 par preferred shares outstanding the entire year. No cash dividends were declared but Owl did declare and distribute a 3 for 1 stock split on common shares on July 1. What is earnings per share? $1.47 $.98 $3.96 $1.37
Explanation / Answer
1)
Net income = 100000
Less: Preferred dividend = 10000
Earnings available to common stock holders = 90000
Additional 30000 common shares were outstanding from Oct to Dec 2019 i.e. for 3 months.
Weighted average number of common shares outstanding through out the year = 60000 + 30000*3/12 = 60000+7500 = 67500 shares
Owl's 2019 earnings per share = Earnings available to common stock holders /Weighted average number of common shares outstanding through out the year
= 90000/67500 = 1.33
Answer is $1.33
2)
Net income = 350000
Less: Cumulative dividends = 20000*100*5% = 100000
Earnings available to common stock holders = 250000
Number of shares in stock split = 85000*3/1 = 255000
Earnings per share = Earnings available to common stock holders /Weighted average number of common shares outstanding through out the year
= 250000/255000 = 0.98
Answer is $.98
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