Question

Corporation B reported earnings per share of​ $10. Corporation B has​ 100,000 shares of common stock outstanding and reported an increase in​ owners' equity of​ $400,000 for the period. Corporation B paid​ $50,000 in interest expense during the period. Corporation B paid dividends per share of __________.

a. $6.00
b. $5.50
c. $6.50
d. $14.003

Answer 1

a. $6.00

Step-by-step explanation:

Earnings per share on common stock or preferred stock is both after providing for interest and tax expense, therefore earnings per share of $10 would increase owner's equity by $10
`*` 100,000 shares = $1,000,000

Provided net increase recorded in equity = $400,000

Thus dividend paid = $1,000,000 - $400,000 = $600,000

Dividend per share = $600,000/100,000 = $6 per share.

Interest paid by corporation B is not to be considered as this is paid before calculating Earnings per share.

Correct option is

a. $6.00