Fultz Company had 300,000 shares of common stock issued and outstanding at December 31, 2014. During 2015, no additional common stock was issued. On January 1, 2015, Fultz issued 400,000 shares of nonconvertible preferred stock. During 2015, Fultz declared and paid $150,000 cash dividends on the common stock and $125,000 on the nonconvertible preferred stock. Net income for the year ended December 31, 2015, was $800,000. What should be Fultz's 2015 earnings per common share, rounded to the nearest penny?

Question

Quizplus · Accepted Answer

Earnings per common share is calculated as (Net Income - Preferred Dividends) / Average Common Shares Outstanding. Here, it is ($800,000 - $125,000) / 300,000 = $2.25.

Fultz Company Had 300,000 Shares of Common Stock Issued and Outstanding