Question

Morgan Company reported the following information for the year ended December 31, 2015: Net income $ 600,000 Preferred dividends declared and paid 60,000 Common dividends declared and paid 90,000 Average common shares outstanding 90,000 Ending market price per share 45 Net sales 5,100,000 What was Morgan’s earnings per share for 2015?

Answer 1

Morgan’s earnings per share for 2015 is $6

Step-by-step explanation:

To compute the earning per share, we have to use the formula which is shown below:

Earning per share = (Net income - declaration of preference dividend) ÷ (Average common shares outstanding)

= ($600,000 - $60,000) ÷ (90,000 outstanding shares)

= $6

Common dividends declared is not considered. Hence, it is not taken in the computation part.