Artist Company's net income last year was $500,000.The company has 150,000 shares of common stock and 40,000 shares of preferred stock outstanding.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 $1.70 per share on the common stock and $0.70 per share on the preferred stock.The earnings per share of common stock is closest to:

Question

Quizplus · Accepted Answer

Earnings per share = (Net Income - Preferred Dividends)
F1F1F1S1F1F1F10 Average number of common shares outstanding
= ($500,000 - 40,000 shares F1F1F1S1F1F1F10 $0.70 per share)F1F1F1S1F1F1F10 150,000 shares
= ($500,000 - $28,000)F1F1F1S1F1F1F10 150,000 shares = $3.15 per share

Artist Company's Net Income Last Year Was $500,000