Basic Earnings per Share
Response to the following problem:
Burke Company shows the following condensed income statement information for the year ended December 31, 2010:
Income before extraordinary items $29,936
Less: Extraordinary loss (net of income tax credit) (2,176)
Net income $27,760
The company declared dividends of $6,000 on preferred stock and $17,280 on common stock. At the beginning of 2010, 10,000 shares of common stock were outstanding. On May 4, 2010, the company issued 2,000 additional common shares, and on October 19, 2010, it issued a 20% stock dividend on its common stock. The preferred stock is not convertible.
Required
1. Compute the 2010 basic earnings per share.
2. Show the 2010 income statement disclosure of basic earnings per share.
3. Draft a related note to accompany the 2010 financial statements.