Question

Kelley Company reports $1,950,000 of net income for 2017 and declares $273,000 of cash dividends on its preferred stock for 2017. At the end of 2017, the company had 300,000 weighted-average shares of common stock.

1. What amount of net income is available to common stockholders for 2017?
2. What is the company's basic EPS for 2017?

Answer 1

1. Net income available to common stockholders for 2017

= Net income - Preferred dividend

= $1,950,000 - $273,000

= $1,677,000

2. Basic EPS

= Net income available to common stockholders

Weighted average shares of common stock

= $1,677,000

300,000 shares

= $5.59 per share

Step-by-step explanation:

The amount of net income available to common stock holders is net income minus dividend paid to preferred stockholders.

Basic earnings per share is the ratio of net income available to common stockholders to weighted average shares of common stock.