Question

Waterway Industries had 290000 shares of common stock issued and outstanding at December 31, 2020. During 2021, no additional common stock was issued. On January 1, 2021, Waterway issued 395000 shares of nonconvertible preferred stock. During 2021, Waterway declared and paid $185000 cash dividends on the common stock and $151000 on the nonconvertible preferred stock. Net income for the year ended December 31, 2021, was $953000. What should be Waterway's 2021 earnings per common share, rounded to the nearest penny?

Answer 1

$2.77 per share

Step-by-step explanation:

The computation of the earning per share is shown below:

As we know that

Earning per share = (Net income - dividends on preferred stock) ÷ (Weighted Average outstanding common shares )

= ($953,000 - $151,000) ÷ (290,000 shares)

= ($802,000) ÷ (290,000 shares)

= $2.77 per share

We simply applied the above formula so that the earning per share could arrive