At December 31, 2018 and 2017, G Co. had 50,000 shares of common stock and 5,000 shares of 5%, $100 par value cumulative preferred stock outstanding. No dividends were declared on either the preferred or common stock in 2018 or 2017. Net income for 2018 was $500,000. For 2018, basic earnings per common share amounted to:

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Quizplus · Accepted Answer

$\frac{\$ 500,000-25,000}{50,000}=\$ 9.50 \mathrm{EPS}$ Even though no dividends were declared, the preferred dividends are subtracted from the numerator since the preferred shares are cumulative.