Question

A corporation has​ 3,000 shares,​ 10% preferred stock of​ $50.00 par preferred​ stock, and​ 6,000 shares of common stock outstanding. The net income for the year is​ $290,000.

Calculate earnings per share.​ (Round your answer to the nearest​ cent.)

Answer 1

Answer:

$45.83

Explanation:

Data provided in the question:

Number of shares = 3,000

Preferred stock = 10%

par preferred​ stock  = $50.00

shares of common stock outstanding = 6,000

Net income for the year =​ $290,000

Now,

Earnings available to equity share holders

= Net income - Preferred dividend

= $290,000 - [ ( 10% of 3,000 ) × $50.00 ]

= $290,000 - ( 300 × $50.00 )

=  $290,000 - $15,000

= $275,000

Therefore,

Earnings per share

= Earnings available to equity share holders ÷ shares of common stock outstanding

= $275,000 ÷ 6,000

= $45.83