Wednesday, April 18, 2012

Calculate Earnings Per Share EPS Example

A shoe manufacturing corporation had 15,000 shares of common stock outstanding on January 1 of 2010, and issued an additional 5,000 shares on June 1 of 2010. There was no preferred stock outstanding that was issued by the shoe company. The manufacturing corporation reports net income of $200,000 on its income statement for the year of 2010.

Calculate basic earnings per share (EPS) for the calendar year? 

a. $11.05
b. $11.16
c. $11.73
d. $12.43

Correct Answer:

Earnings Per Share (EPS) = Net Income /Weighted Average Common Shares Issued 

Weighted Average Common Shares Issued = 15,000 x (5/12) + 20,000 x (7/12) = 17,917

200,000/17,917 = $ 11.16

The Correct Answer to this Accounting  Example is B (11.16)

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