For the year ended December 31, 2016, Norstar Industries reported net income of $655,000. At January 1, 2016, the company had 900,000 common shares outstanding. The following changes in the number of shares occurred during 2016: Apr. 30 Sold 60,000 shares in a public offering. May 24 Declared and distributed a 5% stock dividend. June 1 Issued 72,000 shares as part of the consideration for the purchase of assets from a subsidiary. Required: Compute Norstar's earnings per share for the year ended December 31, 2016.

Question

Michelle Mclean

Business

3 June, 11:54

For the year ended December 31, 2016, Norstar Industries reported net income of $655,000. At January 1, 2016, the company had 900,000 common shares outstanding. The following changes in the number of shares occurred during 2016: Apr. 30 Sold 60,000 shares in a public offering. May 24 Declared and distributed a 5% stock dividend. June 1 Issued 72,000 shares as part of the consideration for the purchase of assets from a subsidiary. Required: Compute Norstar's earnings per share for the year ended December 31, 2016.

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Karissa Bates · Answer 1

1.272 per share

Explanation:

The computation of earnings per share is shown below:-

Weighted Average number of Common shares outstanding = outstanding common shares : Net income

= 900,000 : $707,810

= 1.272 per share

Where,

Net Income = Preferred Dividends : Weighted Average number of Common shares outstanding

= $655,000 : (1 + 0.05) + (60,000 * 8 months : 12 months) * 1.05 + (72,000 * 7 months : 12 months)

= $623,810 + 40,000 * 1.05 + 42,000

= $623,810 + 42,000 + 42,000

= 707,810