Farah Snack Co. has earnings after taxes of $150,000. Interest expense for the year was $20,000; preferred dividends paid were $20,000; and common dividends paid were $30,000. Taxes were $22,500. The firm has 100,000 shares of common stock outstanding. Earnings per share on the common stock was

Question

Quizplus · Accepted Answer

Earnings after taxes − Preferred stock dividends = Earnings available to common
$150,000 − $20,000 = $130,000 EAC
Earnings per share = Earnings available to common/number of shares outstanding
$130,000/100,000 = $1.30