The Neron Company's net income for the year ended December 31 was $30,000.During the year,Neron declared and paid $3,000 in cash dividends on preferred stock and $5,250 in cash dividends on common stock.At December 31,36,000 shares of common stock were outstanding,30,000 of which had been issued and outstanding throughout the year and 6,000 of which were issued on July 1.There were no other common stock transactions during the year,and there is no potential dilution of earnings per share.What should be the year's basic earnings per common share of Neron,rounded to the nearest penny?
A) $0.66
B) $0.75
C) $0.82
D) $0.91

Question

Quizplus · Accepted Answer

The basic earnings per share (EPS) is calculated by subtracting preferred dividends from net income and dividing by the weighted average number of common shares outstanding. Net income is $30,000, and preferred dividends are $3,000, leaving $27,000 for common shareholders. The weighted average shares are 33,000 (30,000 shares for the full year and 6,000 shares for half a year). Thus, EPS = $27,000 / 33,000 = $0.82.

The Neron Company's Net Income for the Year Ended December