Question

For the year ended December 31, 2018, Norstar Industries reported net income of $980,000. At January 1, 2018, the company had 1,130,000 common shares outstanding. The following changes in the number of shares occurred during 2018:

Apr. 30 Sold 100,000 shares in a public offering.

May 24 Declared and distributed a 5% stock dividend.

June 1 Issued 114,000 shares as part of the consideration for the purchase of assets from a subsidiary.

Required: Compute Norstar's earnings per share for the year ended December 31, 2018. (Enter your answers in thousands.)

Answer 1

Stock dividends, Stock splits or Stock subscriptions (retroactively adjusted) - Shares are treated as if they had always been outstanding and included at full amount for current year.

January 1, 2018	Shares outstanding	1,130,000
April 30	Shres sold	66,667 (100,000*8/12)
May 24	Stock dividend	59,833 [(1,130,000+66,667)*5%]
June 1	Shares issued	66,500 (114,000*7/12)
		1,323,000

Earnings per share = Net Income / Weighted average number of common stock outstanding  

= $980,000 / 1,323,000

= $0.74