Hudson Motors reported $735,000 net income for the current year. Beginning common shares outstanding were 120,000. Hudson also had 10,000, 6% nonconvertible, cumulative, $100 par value preferred shares outstanding for the entire year. No cash dividends were declared. Compute basic earnings per share. (Round your answer to the nearest cent.)

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Quizplus · Accepted Answer

Basic earnings per share = (Net income - Preferred dividends) / Average common shares outstanding. Preferred dividends = 10,000 shares * $100 * 6% = $60,000. Basic EPS = ($735,000 - $60,000) / 120,000 = $5.63.

Hudson Motors Reported $735,000 Net Income for the Current Year