Question

At December 31, 2017 and 2018, Funk & Noble Corporation had outstanding 1,000 million shares of common stock and 13 million shares of 4%, $100 par value cumulative preferred stock. No dividends were declared on either the preferred or common stock in 2017 or 2018. Net income for 2018 was $1,652 million. The income tax rate is 40%. Calculate earnings per share for the year ended December 31, 2018.

Answer 1

$1.6

Step-by-step explanation:

The computation of the earning per share is shown below:

Earning per share = (Net income - preferred stock dividend) ÷ (Number of shares)

where,

Preference stock dividend equals to

= 13 million shares × 4% × $100

= $52 million

And, the other items values would remain the same

Now put these values to the above formula

So, the value would equal to

= ($1,652 million - $52 million) ÷ (1,000 million shares)

= $1,600 million ÷ 1,000 million shares

= $1.6