At December 31, 2011, Marquis Corporation had 100,000 shares of common

QUESTION

At December 31, 2011, Marquis Corporation had 100,000 shares of common stock issued and outstanding, 60,000 of which had been issued and outstanding throughout the year and 40,000 of which had been issued on October 1, 2011. Income before income taxes for the year ended December 31, 2011, was $636,400. In 2011 and 2012, a dividend of $70,000 was paid on 70,000 shares of 10% cumulative preferred stock, $10 par.On April 1, 2012, there were 20,000 additional shares issued. Total income before income taxes for 2012 was $461,000, which included an extraordinary gain before income taxes of $42,000. Assuming a 30% tax rate, what is Marquiss basic earnings per common share for 2011 and for 2012, rounded to the nearest cent? Show computations in good form.
Calculation for net income for the year 2011: Earning before income taxes (EBT) = $636,400 Less : Income taxes $636,400*30/100 = $190,920 _________ Earning after tax (EAT) $445,480 Less: Dividend on shares $70,000 ________ Earning income for common share holders $375,480 _________ Calculations to find out the Weighted Average Common shares 2011: 60000 shares for 2013 whole year= 60,000 shares 40000 shares*3/12(Oct to Dec of 2013)=10,000 shares No of Common shares= 60,000 shares +10,000 shares=70,000 EPS= Earning income for common share holders / No of Common shares = $375,480 /70,000=5.364 rounded to 5.4 =5.4 per share. =5.4 per share

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