Question

At December 31, 2021 and 2020, P Co. had 63,000 shares of common stock and 6,300 shares of 5%, $100 par value cumulative preferred stock outstanding. No dividends were declared on either the preferred or common stock in 2021 or 2020. Net income for 2021 was $695,000.

For 2021, basic earnings per common share amounted to $______. (Round your answer to 2 decimal places.)

Answer 1

$10.53

Step-by-step explanation:

According to the question requirement the basic earnings per common share is here below:-

Preferred dividend = Shares × Par value × Shares percentage

= 6,300 × $100 × 5%

= $31,500

So, Basic earning per share = (Net income - Preferred dividend) ÷ Common shares

= ($695,000 - $31,500) ÷ 63,000

= $663,500 ÷ 63,000

= $10.53

Therefore for computing the basic earning per share we simply applied the above formula.