Question

Farah Snack Co has earnings after taxes of $128, 750. Interest expense for the year was $20,000: preferred dividends paid were $18, 750: and common paid were $30,000. Taxes were $15,000. The firm has 100,000 shares of common stock outstanding Earnings per share on the common stock was

A. $0.90
B. $1.10
C. $0.75
D. $0.80

Answer 1

A. $0.90

Step-by-step explanation:

Earning per share = (Net Income - dividends on preferred stocks)/average outstanding common shares

Particulars Amount

Earning After Tax 128750

Taxes 15000

Earning before Tax & Interest Expense 143750

Interest Expense (20000)

Earning after Interest, but before Tax 123750

Taxes (15000)

Earning after Taxes 108750

Preferred Dividends (18750)

Earning available for common stock holders 90000

common stock outstanding 100000

Earning per share 0.9

Therefore, The outstanding Earnings per share on the common stock was $0.90