Question

Hager Company's accountant calculates the company's basic EPS. In addition to common stock, the company also has nonconvertible, noncumulative preferred stock outstanding. No dividends were declared during the current year. When calculating EPS, the accountant should

Answer 1

ignore the preferred stock dividends when calculating the numerator

Step-by-step explanation:

Hager Company's accountant calculates the company's basic EPS. In addition to common stock, the company also has nonconvertible, noncumulative preferred stock outstanding. No dividends were declared during the current year. When calculating EPS, the accountant should IGNORE THE PREFERRED STOCK DIVIDENDS WHEN CALCULATING THE NUMERATOR.

Earnings per share (EPS) is calculated as a company's profit divided by the outstanding shares of its common stock. The resulting number serves as an indicator of a company's profitability.

Answer 2

B) ignore the preferred stock dividends when calculating the numerator.

Step-by-step explanation:

The formula used to calculate earnings per share (EPS) = (net income after taxes - preferred dividends) / average outstanding common stocks.

Since no preferred stock dividends were declared this year, then their value on the EPS formula is $0, so you could basically ignore them since any number minus 0 is the same number.

EPS = net income after taxes / average outstanding common stocks