Gwinnett Park Co. reported net income of $916,800 for its fiscal year ended Sept

Question

Gwinnett Park Co. reported net income of $916,800 for its fiscal year ended September 30, 2013. At the beginning of that year, 150,000 shares of common stock were outstanding. On February 1. 2013, an additional 30,000 shares were issued. On August 1, 2013, 12,000 shares were purchased as treasury stock. During the year, the company paid the annual dividend on 44,000 shares at 8%, $60 par value preferred stock that were outstanding during the entire fiscal year. Calculate the earnings per share of common stock for the year ended September 30, 2013.

Explanation / Answer

EPS = Earnings attributable to Equity shareholders / Weighted average number of shares outstanding during the year

Calculation of Earnings attributable to Equity shareholders:

Net Income $916800

Less: Dividend paid to preferred Stockholders $211200

Earnings attributable to Equity shareholders $1723200

Calculation of Weighted average number of shares outstanding during the year:

= (150000 * 12/12) + (30000 * 8/12) - (12000 * 2/12)

= 172000

EPS = $1723200 / 172000

EPS = $10.02

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