In 2020 Muller Ltd.earned gross revenues of $2,500,000 and had net income of $480,000.During 2020 the company had 200,000 common shares outstanding and its average shareholders' equity was $1,000,000.Muller's basic earnings per share for 2020 is
A)$2.50.
B)$2.40.
C)$12.50.
D)$0.48.

Question

Quizplus · Accepted Answer

Basic Earnings Per Share (EPS) is calculated by dividing net income by the weighted average number of common shares outstanding during the year.

Weighted average number of common shares outstanding = 200,000 (given)

EPS = Net Income / Weighted average number of common shares outstanding

EPS = $480,000 / 200,000 = $2.40 per share.

Therefore, the correct choice is (B).