Question

Kelley Company reports $960,000 of net income for 2015, and declares $120,000 of cash dividends on its preferred stock, for 2015. At the end of 2015, the company had 400,000 weighted-average shares of common stock. What amount of net income is available to common stockholders for 2015? What is the company's basic EPS for 2015?

Answer 1

1. $840,000

2. 2.1

Step-by-step explanation:

1. Net income available to shareholders

Net income. $960,000

Less : Preferred stock $120,000

Net income available. $840,000

to common stockholders

2. Basic earnings per share for 2015

Earnings per share = Net income available to common stockholders / weighted average shares of common stock

= $840,000 / $400,000

= 2.1