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    Earnings per share

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    At July 1, 2007, Peter Corporation had the following share capital:

    $2 Preferred shares, cumulative, 200,000 shares
    authorized, 50,000 shares issued $ 800,000
    Common shares, 1,000,000 shares authorized, 100,000
    shares issued 2,500,000
    $3,300,000
    *The preferred dividends are 2 years in arrears.

    On January 1, 2008, the board of directors declared and paid a 15% common stock dividend. On April 1, 2008, the company sold an additional 1,000,000 common shares for proceeds of $5,680,000. The corporation earned $985,000 during the year and paid $160,000 in dividends.

    Instructions
    1. Calculate Peters Corporation's earnings per share for the year ended June 30, 2008, assuming the company paid $160,000 in cash dividends.
    2. Calculate Peters Corporation's earnings per share for the year ended June 30, 2008, assuming the company paid $160,000 in cash dividends but there were no preferred dividends in arrears.
    3. Calculate Peters Corporation's earnings per share for the year ended June 30, 2008, assuming the preferred dividends are noncumulative and $50,000 in total cash dividends were paid during the year.

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    https://brainmass.com/business/accounting/earnings-per-share-370542

    Solution Preview

    First step is to calculate the weighted average number of common shares outstanding
    July 1 shares 115,000 (restated for stock dividends)
    Jan 1 shares with stock dividend 115,000
    April 1 - additional shares issued = 1,000,000 (total 1,115,000)
    Weighted average common shares = 115,000 X 6/12 (outstanding for 6 months) + 115,000 X 3/12 (outstanding for 3 months) + 1,115,000 X 3/12 (outstanding for 3 ...

    Solution Summary

    The solution explains the calculation of earnings per share under different assumptions

    $2.19

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