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Exercise 16-18
Pharoah Inc. presented the following data.
| Net income | $2,540,000 | |
| Preferred stock: 53,000 shares outstanding, $100 par, 8% cumulative, not convertible | 5,300,000 | |
| Common stock: Shares outstanding 1/1 | 686,400 | |
| Issued for cash, 5/1 | 308,400 | |
| Acquired treasury stock for cash, 8/1 | 160,800 | |
| 2-for-1 stock split, 10/1 |
Compute earnings per share. (Round answer to 2 decimal places, e.g. $2.55.)
| Earnings per share | $ |
Expert Answer
| Event | Dates | Shares outstanding | Stock split restatement | No. of months | Weighted shares |
| Beg. Balance | Jan1-May1 | 686400 | 2 | 4 | 457600 |
| Issued shares | May1-Aug1 | 994800 | 2 | 3 | 497400 |
| Reacquired shares | Aug1-Oct1 | 834000 | 2 | 2 | 278000 |
| Stock split | Oct1-Dec31 | 1668000 | 1 | 3 | 417000 |
| Total | 1650000 | ||||
| Earnings per share = (Net income – Preferred dividends)/ Weighted shares | |||||
| =(2540000-424000)/1650000= | 1.28 | ||||
