Unique Corp.had 50,000 shares of $5 preferred stock,$100 par,and 100,000 shares of $1 par common stock outstanding throughout the year.Net income for the year was $780,000,and Unique declared and distributed a cash dividend of $1 per share on its common stock.Earnings per share amounted to:

Question

Quizplus · Accepted Answer

The dividend is only declared and distributed on the common stock, not on the preferred stock. Therefore, the dividend paid to common shareholders is:
100,000 shares x $1 per share = $100,000
Net income of $780,000 is then divided by the weighted average number of shares outstanding:
$780,000/(100,000 + 50,000) = $780,000/150,000 = $5.20
Therefore, earnings per share amounted to $5.20, which is closest to choice C.