Bubba Corporation has net income of $4,200,000. It has 100,000 outstanding shares of 8% preferred stock ($100 par value) and 400,000 shares of common stock ($10 par value). What are the earnings per share of common stock?
A)$8.50
B)$6.00
C)$4.20
D)$10.50

Question

Quizplus · Accepted Answer

$8.50. Subtract the preferred dividend of $800,000 (100,000 x 8% x 100) from the net income. Divide the result of $3,400,000 ($4,200,000 - $800,000) by the 400,000 common shares to obtain $8.50.

Bubba Corporation Has Net Income of $4,200,000