Stucker Corp. just started their annual company-wide evaluation of the most recent year's performance. Management looks at many financial and nonfinancial measures as part of this comprehensive review. Their accountant compiled the following information:
Sales: $9,320,568
Operating Expenses: $7,623,004
Weighted Average Common Shares Outstanding ($2 per share): $12,467,200
If the company has $52,000 of preferred dividends and there is no income tax, then how much will their earnings per share be for the year?

Question

Quizplus · Accepted Answer

This question requires familiarity with the formula for earnings per share (EPS), which is Net Income minus Preferred Dividends divided by Weighted Average Common Shares Outstanding. Before using this formula, you must first solve for both Net Income and the Number of Weighted Average Common Shares Outstanding. Net Income = Sales - Operating Expenses = $9,320,568 - $7,623,004 = $1,697,564. Weighted Average Common Shares Outstanding = $12,467,200/$2 = 6,233,600 shares. EPS = ($1,697,564 - $52,000)/6,233,600 shares = $1,645,564/6,233,600 = $0.26 per share (Choice A).