Question

At December 31, 2007 Polk Company had 300,000 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 2007 or 2008. On January 30, 2008, Polk declared a 100% stock dividend on its common stock. Net income for 2008 was $950,000. In its 2008 financial statements, Polk's 2008 earnings per common share should be

Answer 1

Polk Company

In its 2008 financial statements, Polk's 2008 earnings per common share should be:

= $1.42.

Step-by-step explanation:

a) Data and Calculations:

December 31, 2007

Common stock outstanding = 300,000 shares

5%,Cumulative preferred stock outstanding, $100 par value = 10,000 shares

January 30, 2008 Stock dividend on common stock = 100% = 300,000 shares

Common stock outstanding = 600,000 shares

Net income for 2008 = $950,000

Cumulative preferred stock dividends:

2007 = $50,000

2008 = 50,000

Total = $100,000

Earnings for common stockholders = $850,000

Earnings per common share = $1.42