Question

Junkyard Arts, Inc., had earnings of $593,900 for the year.

The company had 50,000 shares of common stock outstanding during the year and issued 2,700 shares of $100 par value preferred stock.

The preferred stock has a dividend of $7 per share.

There were no transactions in either common or preferred stock during the year.

Determine the basic earnings per share for Junkyard Arts for the year. Round answer to two decimal places.

Answer 1

The basic EPS is $11.50

Step-by-step explanation:

The basic earnings per share is the amount of net income that is earned per share of common equity or the amount of net income attributable to each share of common stock. The basic earnings per share (EPS) is calculated using the following formula,

Basic EPS = (Net Income - Preferred stock dividend) / Weighted average number of common shares outstanding

The preferred stock dividend for the period was = 7 * 2700 = 18900

Basic EPS = (593900 - 18900) / 50000

Basic EPS = $11.50