Arlberg Company's net income last year was $250,000.The company had 150,000 common shares and 80,000 preferred shares.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 $1.30 per common share and $1.40 per preferred share.The earnings per common share was closest to which of the following?

Question

Quizplus · Accepted Answer

First, we calculate the total dividends paid to common shareholders:

Total dividends paid to common shareholders = $1.30 x 150,000 = $195,000

Then, we calculate the total dividends paid to preferred shareholders:

Total dividends paid to preferred shareholders = $1.40 x 80,000 = $112,000

Now, we can calculate the net income available to common shareholders:

Net income available to common shareholders = Net income - Preferred dividends

Net income available to common shareholders = $250,000 - $112,000 = $138,000

Finally, we can calculate the earnings per common share:

Earnings per common share = Net income available to common shareholders / Number of common shares

Earnings per common share = $138,000 / 150,000 = $0.92

Therefore, the earnings per common share was closest to $0.92, which is answer B.

Arlberg Company's Net Income Last Year Was $250,000