The income statement for Roland Inc. shows income before income taxes $700,000, income tax expenses $210,000, and net income $490,000. If Roland declared $150,000 of cash dividends on preferred stock and has 100,000 shares of common stock outstanding throughout the year, earnings per share is:

Question

Quizplus · Accepted Answer

To calculate earnings per share for common stock, we need to subtract the dividends paid on preferred stock from the net income first:

Net Income - Preferred Dividends = $490,000 - $150,000 = $340,000

Then, we divide the net income available for common stockholders by the number of common shares outstanding:

$340,000 ÷ 100,000 shares = $3.40 per share

Therefore, the correct answer is B.

The Income Statement for Roland Inc