Maxwell Communications Corporation has after-tax earnings of $1,508,000 after paying $45,000 in dividends to its 10,000 preferred stockholders.If Maxwell has 500,000 common stockholders,its earnings per share are

Question

Quizplus · Accepted Answer

First, we need to calculate the total amount paid to preferred stockholders:

$45,000 divided by 10,000 shares = $4.50 per share

Total payment to preferred stockholders = $4.50 x 10,000 shares = $45,000

Subtract this from the total after-tax earnings to get the earnings available for common stockholders:

$1,508,000 - $45,000 = $1,463,000

Divide this by the total number of common stockholders:

$1,463,000 divided by 500,000 shares = $2.926 per share

Therefore, the earnings per share for common stockholders is $2.926 or approximately $3.02 when rounded to the nearest cent. The answer is D.

Maxwell Communications Corporation Has After-Tax Earnings of $1,508,000 After Paying