Question

canal industries has provided the following information: net income, $330,000 preferred shares issued, 6,900 weighted average number of shares of common stock issued, 24,900 cash dividends declared and paid on common stock, $39,000 market price per share, $45 weighted average number of treasury shares of common stock, 4,900 what is canal's earnings per share?

Answer 1

Canal Industries' earnings per share is calculated by subtracting treasury shares from the average shares issued and dividing the net income by this amount. The EPS for Canal, with the information provided, is $16.50.

Step-by-step explanation:

To calculate Canal Industries' earnings per share (EPS), we must deduct the weighted average number of treasury shares from the weighted average number of issued common stock and then divide the net income by this adjusted number of shares. Treasury shares are shares that the company has bought back and do not count towards the EPS calculation. Here's the formula to calculate EPS:

Earnings Per Share (EPS) = (Net Income - Preferred Dividends) / (Weighted Average Shares Outstanding - Treasury Shares)

However, we are not provided with the amount of preferred dividends, so we will assume that the net income given is available to common shareholders. Therefore:

1. Net Income = $330,000
2. Weighted Average Shares of Common Stock Issued = 24,900
3. Weighted Average Treasury Shares of Common Stock = 4,900

First, adjust the weighted average shares of common stock for the treasury shares:

24,900 - 4,900 = 20,000 shares

Now, divide the net income by the adjusted number of shares:

$330,000 / 20,000 shares = $16.50

Therefore, the Canal's earnings per share is $16.50.