Archer Company had net income of $40,000 last year.The company has 5,000 shares of common stock and 2,500 shares of preferred stock outstanding.There was no change in the number of common or preferred shares outstanding during the year.Preferred dividends were $2 per share.The earnings per share of common stock was:
A)$7.00
B)$8.00
C)$5.33
D)$7.50

Question

Quizplus · Accepted Answer

Earnings per share = (Net Income - Preferred Dividends)
F1F1F1S1F1F1F10 Average number of common shares outstanding
= ($40,000 - 2,500 shares F1F1F1S1F1F1F10 $2.00 per share)F1F1F1S1F1F1F10 5,000 shares
= ($40,000 - $5,000)F1F1F1S1F1F1F10 5,000 shares = $7.00 per share

Archer Company Had Net Income of $40,000 Last Year