RST's net income for the year ended December 31, 2014, was $30,000.During 2014, RST declared and paid $3,000 cash dividends on preferred shares (the full year's requirement)and $5,250 cash dividends on common shares.At December 31, 2014, 36,000 common shares were issued and outstanding, 30,000 of which had been outstanding throughout the year and 6,000 of which were issued on July 1, 2014.No other common share transactions were completed during the year, and there is no potential dilution of earnings per share.The 2014 earnings per common share of RST, rounded to the nearest cent, should be:

Question

Quizplus · Accepted Answer

To calculate earnings per share (EPS), subtract preferred dividends from net income and divide by the weighted average number of common shares. Net income is $30,000, and preferred dividends are $3,000, leaving $27,000 for common shareholders. The weighted average number of shares is 33,000 (30,000 shares for the full year and 6,000 shares for half a year). EPS = $27,000 / 33,000 = $0.82.

RST's Net Income for the Year Ended December 31, 2014