Question

Kelley Company reports $1,500,000 of net income and declares $210,000 of cash dividends on its preferred stock for the year 2013. At year-end, the company had 340,000 weighted-average shares of common stock.

a. What amount of net income is available to common stockholders for 2013?
b. What is the company's basic EPS for 2013? Round your answer to the nearest whole cent.

Answer 1

a. $1,290,000

b. $3.80

Step-by-step explanation:

a. The computation of the net income is shown below:

= Net income - preference dividend

= $1,500,000 - $210,000

= $1,290,000

b. The earning per share is shown below:

= (Net income) ÷ (weighted-average shares of common stock)

= ($1,290,000) ÷ (340,000 shares)

= $3.80

Simply we apply the net income formula after considering the preference dividend and then earning per share is computed