A corporation reports net income of $100,000 for the current year. The corporation has 10,000 shares of cumulative, 10%, $50 preferred stock and 55,000 shares of $10 par common stock outstanding all of the year. What is earnings per share?

Question

Quizplus · Accepted Answer

First, calculate the dividends for the preferred stock: 10,000 shares * $50 * 10% = $50,000. Subtract this from the net income to get the amount available for common shareholders: $100,000 - $50,000 = $50,000. Then, divide by the number of common shares: $50,000 / 55,000 shares = $0.91 per share.

A Corporation Reports Net Income of $100,000 for the Current