Question

At December 31, 2017, Whispering Company had 510,000 shares of common stock issued and outstanding, 340,000 of which had been issued and outstanding throughout the year and 170,000 of which were issued on October 1, 2017. Net income for 2017 was $1,970,000, and dividends declared on preferred stock were $350,000.

Answer 1

Answer:

This question missing requirement ,but judging from the details provided, there is a strong indication that earnings per share is the missing requirement

The earnings per share is $4.40 as shown below

Explanation:

In calculating earnings per share for Whispering, two issues need to be sorted out ,firstly the amount of earnings attributable to common stock and the number of common stock entitled to receive dividends,that is the weighted average number of common stock.

Firstly,the earnings due to common stock holders is net income less dividends payable to preferred stock,that is $1620000 ($1950000-$350000).

However, the weighted average number of stock is calculated thus:

340000*10/12                = 283333

(340000+170000)*2/12 =85000

Weighted average           368333

Hence earnings per share=$1620000/368333=$4.40 per share