Team Shirts had net income of $23,000.The balance sheet showed beginning and ending balances in shareholders' equity of $100,000 and $110,000,respectively.There were no preferred shares and 20,000 common shares outstanding throughout the year.Calculate earnings per share.

Question

Quizplus · Accepted Answer

Earnings per share (EPS) is calculated by dividing the net income by the number of common shares outstanding. 
EPS = (Net Income - Preferred Dividends)/Weighted Average Common Shares Outstanding 
Since there were no preferred shares, the formula becomes: 
EPS = Net Income / Weighted Average Common Shares Outstanding 
Weighted Average Common Shares Outstanding = Total common shares outstanding throughout the year = 20,000 
EPS = $23,000 / 20,000 = $1.15 
Therefore, the best choice is B because it correctly calculates the EPS as $1.15.

Team Shirts Had Net Income of $23,000