For the year ended December 31, 2021, Norstar Industries reported net income of $960,000. At January 1, 2021, the company had 1,050,000 common shares outstanding. The following changes in the number of shares occurred during 2021:
Apr. 30 Sold 80,000 shares in a public offering.
May 24 Declared and distributed a 5% stock dividend.
June 1 Issued 90,000 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, 2021. (Enter your answers in thousands. Round "EPS" answer to 2 decimal places. Do not round intermediate calculations.)

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tutorAnne tutorAnne · Answer 1 · 2021-05-11T02:40:43+02:00

Answer:

Earning per share for the year ended December 31, 2021 on Norstar's earnings = $0.79 per share

Explanation:

Earning per share is calculated as

Net income reported / Weighted number of outstanding shares

where,

Net income reported is $960,000

And, the weighted number of outstanding share is

For Jan.1

Jan 1 2021 shares × stock dividend

Dividend = 100 + rate = 100 + 0.05 = 1.05

1,050,000 x 1.05=$1, 102,500

For April

April 30 shares × stock dividend× number of months / total number of months in a year

80,000 x 1.0 5 x 8/12(April 30 to December 31 = 8 months)=56,000

For June

June 1 shares × number of months/ total number of months in a year

90,000 x 7/12=56,000

Total weighted number of outstanding shares =$1,102,500+56,000+52,500= $1,211,000

So, the earning per share is

= 960,000 / $1,211,000 shares

= $0.79 per share