Kingery Corporation began the calendar (and ﬁscal) year with a simple structure consisting of 38,000 shares of common stock outstanding. On May 1, 10,000 additional shares were issued, and another 1,000 shares were issued on September 1. The company had a net income for the year of $234,000. a. Compute the earnings per share of common stock. b. Assume that the company also had 6,000 shares of 6%, $50 par value cumulative preferred stock outstanding throughout the year. Compute the basic earnings per share of common stock.

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amcool amcool · Answer 1 · 2020-04-17T08:23:51+02:00

Answer:

a. EPS = $4.78 per share

b. Basic EPS = $4.41 per share

Explanation:

a. Compute the earnings per share (EPS) of common stock

Number of shares outstanding = 38,000 + 10,000 + 1,000 = 49,000

EPS = Net income ÷ Number of common shares outstanding = $234,000 ÷ 49,000 = $4.78 per share

b. Compute the basic earnings per share of common stock

Preferred dividend = 6,000 × $50 × 6% = $18,000

Basic EPS = (Net income - Preferred dividend) ÷ Number of common shares outstanding = ($234,000 - $18,000) ÷ 49,000 = $4.41 per share

andromache andromache · Answer 2 · 2022-04-05T14:55:46+02:00

a. The Earning per Share = $4.78 per share.

b. Basic EPS = $4.41 per share.

Since

a.

Number of shares outstanding = 38,000 + 10,000 + 1,000 = 49,000

Now we know that

EPS = Net income ÷ Number of common shares outstanding

= $234,000 ÷ 49,000

= $4.78 per share

b.

Now

Preferred dividend = 6,000 × $50 × 6% = $18,000

We know that

Basic EPS = (Net income - Preferred dividend) ÷ Number of common shares outstanding

= ($234,000 - $18,000) ÷ 49,000

= $4.41 per share

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