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1 November, 15:59

Company reported net income for 2018 in the amount of $50,000. During 2018, Getaway declared and paid $2,000 in cash dividends on its nonconvertible preferred stock. Getaway also paid $10,000 cash dividends on its common stock. Getaway had 40,000 common shares outstanding from January 1 until 10,000 new shares were sold for cash on July 1, 2018. A 2-for-1 stock split was granted on July 5, 2018. What is the 2018 basic earnings per share (rounded) ?

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  1. 1 November, 16:22
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    Basic EPS $1.02

    Explanation:

    Basic EPS=Net income-Dividend on preferred stocks/Average Oustanding shares

    Average Shares outstanding=45,000

    40,000*6/12=20,000

    50000*6/12=25,000

    By putting values in above formula, we get

    Basic EPS=$50,000-$2,000/45,000

    Basic EPS=$1.02
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