Question

Swifty Corporation had 297000 shares of common stock issued and outstanding at December 31, 2020. No common stock was issued during 2021. On January 1, 2021, Swifty issued 198000 shares of nonconvertible preferred stock. During 2021, Swifty declared and paid $103000 cash dividends on the common stock and $85000 on the preferred stock. Net income for the year ended December 31, 2021 was $623000. What should be Swifty's 2021 earnings per common share?

Answer 1

Answer: $1.81

Step-by-step explanation:

Given the following:

Common stock issued and outstanding = 297000

Cash Dividend on preferred stock = $85000

Cash Dividend on common stock = $103,000

Net income for the year ended December 31, 2021 = $623,000

2021 earning pe share :

Earning per share(EPS) = (Net income - Dividend to preferred shareholders) ÷ average outstanding shares of the company

Earning per share = ($623,000 - $85,000) ÷ 297000

EPS = $538,000 ÷ 297000 = $1.81