Shamrock Company had net income of $30,000. On January 1, the number of shares o

Question

Shamrock Company had net income of $30,000. On January 1, the number of shares of common stock outstanding were 8,000. On April 1, the company issued an additional 2,000 shares of common stock. There were no other stock transactions. The company's earnings per share is?

I must not be calculating the weighted-average common shares outstanding correctly because I keep coming up with $3.21, which is not one of the multiple choice answers provided.

Can you tell me what the company's earnings per share is?

Thanks.

Explanation / Answer

You need to work out the weighted average no. of shares outstanding. Time Period; O/S Shares; Part of Yr; Wtd Ave Jan - Mar; 8,000 shares; 3/12; 2,000 Apr - Dec; 10,000 shares; 9/12; 7,500 Total weighted average shares outstanding 9,500 EPS = $30,000/9,500 = $3.16 (rounded to 2 decimal places

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