Question

Clair, Inc. reports net income of $700,000. It declares and pays dividends of $100,000 for the year, one-half of which relate to the preferred shares. The weighted-average number of common shares outstanding during the year is 200,000 shares, and the weighted-average number of preferred shares outstanding during the year is 10,000 shares. Earnings per share for Clair, Inc. is (round your answer to the nearest cent):

Answer 1

Earnings per share = $3.3

Step-by-step explanation:

Earnings per share is the total earnings attributable to ordinary shareholders divided by the number of units of common stock

Earnings attributable to ordinary shareholders= Net income after tax - preference dividend

Earnings = 700,000- (50%× 100,000)

Earnings = 650,000

Earnings per shares(EPS) = Earnings / Units of shares

=650,000 /200,000

= $3.3 per unit