Question

Financial statement data for the years ended December 31 for Dovetail Corporation follow: 20Y3 20Y2 Net income $448,750 $376,000 Preferred dividends $40,000 $40,000 Average number of common shares outstanding 75,000 shares 60,000 shares a. Determine the earnings per share for 20Y3 and 20Y2. Round your answers to two decimal places.

Answer 1

Earnings per share on common equity

20Y3 = 408,750/75,000 = $5.45

20Y2 = 336,000/60,000 = $5.60

Step-by-step explanation:

As for the information provided we have,

Each year income as given

20Y3 = $448,750

20Y2 = $376,000

Preference Dividend for each year as given

20Y3 = $40,000

20Y2 = $40,000

Average common stock outstanding shares at each year end

20Y3 = 75,000 shares

20Y2 = 60,000 shares

Therefore, income for equity, for each year

20Y3 = $448,750 - $40,000 = $408,750

20Y2 = $376,000 - $40,000 = $336,000

Thus, Earnings per share on common equity

20Y3 = 408,750/75,000 = $5.45

20Y2 = 336,000/60,000 = $5.60