Question

On January 1, 2016, Laura Corporation had 18,000 shares of common stock outstanding, and reacquired 2,000 shares on July 1. The company earned net income of $110,800 and paid a cash dividend on its preferred stock of $36,000. What was the basic earnings per share for the year

Answer 1

Basic EPS is $4.40

Step-by-step explanation:

basic earnings per share=earnings attributable to common stock/weighted average number of common stock

earnings attributable to common stock=net income-preferred stock dividend

net income is $110,800

preferred stock dividend is $36000

earnings attributable to common stock=$110,800-$36,000

=$ 74,800.00

Weighted average number of stock

18000 shares *12/12 18,000

2000 shares *6/12 (1000)

Weighted average 17000

Earnings per share=$74,800/17000

=$4.4