Southern Corporation has 20,000 shares of common stock and 5,000 shares of preferred stock outstanding during 2011. Southern reported net income of $60,000 for 2011. Each share of preferred stock is convertible into two shares of common stock. The preferred stock is entitled to a noncumulative annual dividend of $5 per share. After the common stock has been paid a dividend of $1 per share, the preferred stock participates in any additional dividends on a 2:3 per share ratio with the common. For 2011, the common shareholders have been paid $25,000 (or $1.25 per share), and the preferred shareholders have been paid $25,000 (or $5.00 per share).
Required:
Calculate basic earnings per share under the two-class method for 2011.

Question

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The Answer of Southern Corporation has 20,000 shares of common stock and 5,000 shares of preferred stock outstanding during 2011. Southern reported net income of $60,000 for 2011. Each share of preferred stock is convertible into two shares of common stock. The preferred stock is entitled to a noncumulative annual dividend of $5 per share. After the common stock has been paid a dividend of $1 per share, the preferred stock participates in any additional dividends on a 2:3 per share ratio with the common. For 2011, the common shareholders have been paid $25,000 (or $1.25 per share), and the preferred shareholders have been paid $25,000 (or $5.00 per share).
Required:
Calculate basic earnings per share under the two-class method for 2011.

Southern Corporation Has 20,000 Shares of Common Stock and 5,000