Donnell Corp. had 100,000 shares of 8% preferred stock, $100 par, and 500,000 shares of $1 par common stock outstanding throughout the year. Net income for the year was $4,800,000, and Donnell declared and distributed a cash dividend of $4 per share on its common stock. Earnings per share amounted to:

Question

Quizplus · Accepted Answer

To calculate earnings per share (EPS), first determine the preferred dividends: 100,000 shares * $100 par * 8% = $800,000. Subtract this from net income: $4,800,000 - $800,000 = $4,000,000. Then divide by the number of common shares: $4,000,000 / 500,000 = $8.00 per share.