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On December 31, 2020, Witherspoon Services had 800,000 shares of common stock and 200,000 shares of 5.5%, noncumulative, nonconvertible $10 par preferred stock issued and outstanding. On March 2, 2021, Witherspoon sold 120,000 common shares. In keeping with its long-term share repurchase plan, 30,000 shares were retired on August 31. Witherspoon distributed a 10% common stock dividend on June 3. Witherspoon's net income for the year ended December 31, 2019, was $600,000. The company paid cash dividends of $110,000 to preferred shareholders on December 20, 2021. The income tax rate is 25%.

Required:
Compute Witherspoon's earnings per share for the year ended December 31, 2021.

Sagot :

anthougo

Answer:

Witherspoon Services

Witherspoon's earnings per share for the year ended December 31, 2021 is:

= $0.50.

Explanation:

a) Data and Calculations:

December 31, 2020: Common stock outstanding = 800,000

March 2, 2021: Sale of common stock                       120,000

June 3, 2021: Stock dividend (920,000 *10%)            92,000

August 31, 2021: Treasury stock                                 (30,000)

Number of common stock outstanding  =                 982,000

Net income for the year =  $600,000

Preferred dividends               (110,000)

Income for common stock $490,000

Earnings per share = $0.50 ($490,000/982,000)

December 31, 2020: 5.5% Preferred stock outstanding = 200,000

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