Question

Elite Trailer Parks has an operating profit of $275,000. Interest expense for the year was $37,900; preferred dividends paid were $29,100; and common dividends paid were $41,500. The tax was $67,700. The firm has 16,400 shares of common stock outstanding.

Required:
a. Calculate the earnings per share and the common dividends per share for Elite Trailer Parks. (Round your answers to 2 decimal places.)
b. What was the increase in retained earnings for the year?

Answer 1

a. Earning per share

This is the amount due to shareholders divided by the common share number.

= Operating profit - Interest - Preferred divided - tax ) / No of commons shares

= (275,000 - 37,900 - 29,100 - 67,700) / 16,400

= $8.55

Dividend per share

= Common dividend / Common stock

= 41,500 / 16,400

= $2.53

b. Increased in retained earnings = Profit - Interest - Preferred divided - tax - common dividend

= 275,000 - 37,900 - 29,100 - 67,700 - 41,500

= $98,800

Retained earnings will increase by $98,800