Arquandt Company's net income last year was $550,000.The company has 150,000 shares of common stock and 50,000 shares of preferred stock outstanding.There was no change in the number of common or preferred shares outstanding during the year.The company declared and paid dividends last year of $1.20 per share on the common stock and $1.70 per share on the preferred stock.The earnings per share of common stock are closest to:

Question

Quizplus · Accepted Answer

First, we need to calculate the total dividend amount paid on common and preferred stock:
Total dividend on common stock = $1.20/share x 150,000 shares = $180,000
Total dividend on preferred stock = $1.70/share x 50,000 shares = $85,000

Next, we need to calculate the net income available to common shareholders:
Net income - preferred dividends = $550,000 - $85,000 = $465,000

Finally, we can calculate the earnings per share of common stock:
EPS = Net income available to common shareholders / Number of common shares outstanding
EPS = $465,000 / 150,000 shares = $3.10/share

Therefore, the closest answer is B) $3.10.

Arquandt Company's Net Income Last Year Was $550,000