Jennings Corporation's net income for the current year was $270,000. The corporation had outstanding 5,000 shares of 10%, $100 par value nonconvertible preferred stock and 10,000 shares of $20 par value common stock. No shares were issued or retired during the year. The amount of income to be used in the basic calculation of earnings per share is:

Question

Quizplus · Accepted Answer

The income to be used in the basic calculation of earnings per share is the net income minus the preferred dividends. Preferred dividends are $50,000 (5,000 shares * $100 par value * 10%). Therefore, $270,000 - $50,000 = $220,000.

Jennings Corporation's Net Income for the Current Year Was $270,000