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A company reported net income available to common stockholders of $2,000,000 for the year ended December 31, year 2. The company had 1,500,000 shares of common stock outstanding as of January 1, year 2, and issued 500,000 additional shares of common stock on May 1, year 2. What amount is the company's basic earnings per share for the year ended December 31, year 2?

Respuesta :

Answer:

$1.12

Explanation:

Basic earnings per share is the standard calculation of the portion of a company's income that is earned or returned on one share of its common stock.

The formula for Basic Earnings Per Share is = Net Profit - Preference Dividend / Weighted Average Number of Shares

Weighted average number of shares can be obtained by multiplying the number of outstanding shares by the portion of the reporting period those shares covered.

Therefore applying the above to the scenario we have: 2000000/ [1500000+(500000*7/12)] = 2,000,000/1,791,667 = $1.12

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