Abel Company provided the following information from its financial records:
$\begin{array}{lr}\text { Net income }&\$250,000&\text { Common shares outstanding }1/1&200,000\
\text { Common stock dividends}&\$20,000&\text { Common shares outstanding }12/31&300,000\
\text { Preferred stock dividends}&\$25,000&\text { Preferred shares outstanding }1/1&10,000\
\text { Sales }&\$1,000,000&\text { Preferred shares outstanding }12/31&6,000
\end{array}$

What is the company's earnings per share?

Question

Abel Company provided the following information from its financial records:
$\begin{array}{lr}\text { Net income }&\$250,000&\text { Common shares outstanding }1/1&200,000\
\text { Common stock dividends}&\$20,000&\text { Common shares outstanding }12/31&300,000\
\text { Preferred stock dividends}&\$25,000&\text { Preferred shares outstanding }1/1&10,000\
\text { Sales }&\$1,000,000&\text { Preferred shares outstanding }12/31&6,000
\end{array}$
 
What is the company's earnings per share?

Quizplus · Accepted Answer

Earnings per share (EPS) is calculated as (Net Income - Preferred Dividends) / Average Common Shares Outstanding. Here, EPS = ($250,000 - $25,000) / [(200,000 + 300,000) / 2] = $225,000 / 250,000 = $0.90.

Abel Company Provided the Following Information from Its Financial Records