Question

The Common Stock account for Baltimore Corporation on January 1, 2018 was $72,500. On July 1, 2018 Baltimore issued an additional 5,500 shares of common stock. The Common Stock is $5 par. There was neither Preferred Stock nor any Treasury Stock. Paid in Capital Excess to par Common Stock was $20,000 on January 1 and $40,000 on July 2 and net income was $145,000.  Use this information to determine for December 31, 2018 the amount of Earnings per Share (rounded to the nearest cent).

Answer 1

Earnings per share = Net income available for common stock holders / Average common stock

Average common shares = 72,500/5 + (5,500 * 6/12)

= 17,250

Earnings Per Share = 145,000 / 17,250

= 8.41 per share

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