Question

At December 31, 2011 and 2010, Miley Corp. had 180,000 shares of common stock and 10,000 shares of 5%, $100 par value cumulative preferred stock outstanding. No dividends were declared on either the preferred or common stock in 2011 or 2010. Net income for 2011 was $400,000. For 2011, earnings per common share amounted to

a. $2.22.
b. $1.94.
c. $1.67.
d. $1.11.

Answer 1

The earnings per common share for Miley Corp. in 2011 is $2.22.

Step-by-step explanation:

To calculate the earnings per common share for Miley Corp. in 2011, we need to divide the net income by the weighted average number of common shares outstanding. Since no dividends were declared on either the preferred or common stock, we can exclude the preferred stock from the calculation.

Net income for 2011 was $400,000. The weighted average number of common shares outstanding is 180,000. Therefore, the earnings per common share for 2011 is:

Earnings per common share = Net income / Weighted average number of common shares

Earnings per common share = $400,000 / 180,000 = $2.22