At December 31,2013,XYZ had 40,000 common shares issued and outstanding and 10,000 nonconvertible preferred shares issued and outstanding.XYZ's net income for the year ended December 31,2014,was $120,000.During 2014,XYZ declared and paid $50,000 cash dividends on common and $8,000 cash dividends on the nonconvertible preferred (the annual requirement).There were no common share or preferred share transactions during the year.The earnings per common share for the year ended December 31,2014,should be:

Question

Quizplus · Accepted Answer

Earnings per common share is calculated by subtracting preferred dividends from net income and then dividing by the number of common shares. ($120,000 - $8,000) / 40,000 = $2.80.

At December 31,2013,XYZ Had 40,000 Common Shares Issued and Outstanding