Problem 2-3 David Company earned $300,000 last year. The company had 5,000 shares of common stock...

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Problem 2-3 David Company earned $300,000 last year. The company had 5,000 shares of common stock outstanding on January 1, s

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Answer 1

Answer #1

Weighted number of shares:

From Jan 1 to May 1 (4 months) = 5,000 X 4/12 = 1,666.67

From May 1 to Oct 1 (5 months) = (5,000 + 8,000) X 5/12 = 5,416.67

From Oct 1 to Dec 31 (3 months) = (5,000 + 8,000 + 4,000) X 3/12 = 4,250

Total = 1,666.67 + 5,416.67 + 4,250 = 11,333.34

EPS = Net income / Weighted number of shares

= $300,000 / 11,333.34

= $26.47

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Answer 2

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